BoC to keep its overnight rate unchanged at 0.50% - TDS

Research Team at TDS expects the Bank of Canada to keep its overnight rate unchanged at 0.50% in January.

Key Quotes

“Constructive news on the growth front is likely to be offset by concerns over the sharp slowdown in core inflation and US trade policy, but the degree the Bank emphasizes the latter will determine the tone of communications.”

“The broad deceleration in the Bank’s core inflation measures, with the CPI-common indicator touching cycle lows, points to a risk of a more dovish stance at this meeting. But the Bank is unlikely to act now as additional time and data will allow for more clarity on both domestic growth dynamics and international politics.”

“Our base case suggests that dovish Bank of Canada messaging will not exceed market expectations, pointing to modestly higher rates in the front-end and a move lower in USDCAD.”