20 Jan 2014
Flash: BoC to maintain stance this week? - BAML
FXstreet.com (Guatemala) - Research team at BAML look ahead to the BoC.
Key Quotes
“After the Bank of Canada (BOC) noted that "downside risks to inflation appear to be greater" in December, investors are likely attaching some probability to a dovish communication at the upcoming BOC meeting. The OIS market is already pricing in about 40% chance of a cut later this year."
"However, we expect the BOC to maintain a neutral stance on the policy this week. The BOC is likely to modestly upgrade growth outlook given some recent improvements in domestic growth and better-than-expected US activity. Turning to a dovish bias at the same time may create a communication problem, in our view. As a result, we believe the BOC is more likely to continue with its wait-and-see approach."
"Having said that, we continue to see risks of BOC adopting a dovish language later this year if inflation continues to decline. Despite modest improvements in growth, high excess capacity points to a further decline in services inflation. Global excess capacity and, especially, growth slowdown in China, indicate a lingering disinflation trend in the prices of goods."
Key Quotes
“After the Bank of Canada (BOC) noted that "downside risks to inflation appear to be greater" in December, investors are likely attaching some probability to a dovish communication at the upcoming BOC meeting. The OIS market is already pricing in about 40% chance of a cut later this year."
"However, we expect the BOC to maintain a neutral stance on the policy this week. The BOC is likely to modestly upgrade growth outlook given some recent improvements in domestic growth and better-than-expected US activity. Turning to a dovish bias at the same time may create a communication problem, in our view. As a result, we believe the BOC is more likely to continue with its wait-and-see approach."
"Having said that, we continue to see risks of BOC adopting a dovish language later this year if inflation continues to decline. Despite modest improvements in growth, high excess capacity points to a further decline in services inflation. Global excess capacity and, especially, growth slowdown in China, indicate a lingering disinflation trend in the prices of goods."