BoC: Nothing has changed - Nomura

According to the analysts at Nomura, the Bank of Canada (BoC) kept its policy rate unchanged at 0.5% as expected, reiterating that “the current stance of monetary policy remains appropriate” and also adding the Bank remains focused on the “significant uncertainties weighing on the outlook”.

Key Quotes

“On the domestic front, the economy is evolving in line with the projection of improving growth reflected in the January Monetary Policy Report, with the BoC suggesting that “growth in 4Q 2016 may have been slightly stronger than expected”. Furthermore, while the Bank acknowledges recent growth in the labour market, it also mentioned that persistent economic slack continues to manifest itself in subdued wage growth and hours worked. On the trade front, the BoC continues to mention that exports remain weighed down by “competitiveness challenges”.”

“On the inflation front, the Bank explicitly mentioned that it is looking through the effects that higher energy prices (due in part to carbon pricing measures introduced in two provinces) have had on headline CPI inflation. In line with the view we have expressed in the past, weak core inflation prints are being acknowledged as pointing to “material excess capacity in the economy”.”

“Overall, decision and (brief) statement does not change our view that the BoC is expected to keep its policy rate unchanged for the rest of 2017. However, there is substantial uncertainty on this outlook, mainly caused by the lack of details on trade and tax policy once Donald Trump becomes US President.”