13 Jul 2015
Bank of Canada preview: On hold with an ease at hand – BAML
FXStreet (Mumbai) - Research Team at BAML believe that Bank of Canada will hold rates at 0.75% at its meeting this week, but take a dovish stance, leaving the door open to an ease later this year.
Key Quotes:
“Data in 1Q and 2Q have been very weak, but the BoC has indicated that the economic fallout from the oil shock would be difficult to measure, and has instead put emphasis on the outlook for a recovery in 2H.”
“We don't think the BoC is ready to take action on the interest rate just yet. But we do believe it will cut growth forecasts sharply with 2015 GDP growth downgraded to around 1.3% from 1.9% in the Monetary Policy Report, more in line with consensus and our own forecasts.”
“The BoC will also likely frame the recent data deterioration as a vindication of the unexpected rate cut in January, keeping rates on hold to buy time for signs of improvement.”
“But when it becomes apparent that a robust pick-up in 2H is not materializing, the BoC will likely ease later this year, probably in October, in our view.”
Key Quotes:
“Data in 1Q and 2Q have been very weak, but the BoC has indicated that the economic fallout from the oil shock would be difficult to measure, and has instead put emphasis on the outlook for a recovery in 2H.”
“We don't think the BoC is ready to take action on the interest rate just yet. But we do believe it will cut growth forecasts sharply with 2015 GDP growth downgraded to around 1.3% from 1.9% in the Monetary Policy Report, more in line with consensus and our own forecasts.”
“The BoC will also likely frame the recent data deterioration as a vindication of the unexpected rate cut in January, keeping rates on hold to buy time for signs of improvement.”
“But when it becomes apparent that a robust pick-up in 2H is not materializing, the BoC will likely ease later this year, probably in October, in our view.”