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At today’s meeting, the Bank of Canada left as expected the key interest rate unchanged at 1.75%. The Loonie (CAD) tumbled across the board. Josh Nye, Senior Economist at RBC Economics Research, points out the BoC statement was more dovish than expected.

Key Quotes:  

“Today’s policy statement was more dovish than expected. The BoC didn’t move explicitly to an easing bias (unlike the Fed and ECB) but sounded more concerned about “persistent trade tensions” that are clouding the outlook.”

“Poloz and Co. still don’t appear to be in any rush to lower rates alongside the Fed (Powell’s comments this morning reinforced expectations for a July cut) but markets seem justified in thinking the BoC’s next move is more likely to be down than up.”

 “Concerns about trade tensions and slowing global growth received top billing in the statement, unlike in May when signs of a firming domestic economy were highlighted.”

“Inflation remains close to 2% (something the Fed and ECB can’t claim) and is expected to be sustained at the BoC’s target by the middle of next year as economic slack is absorbed.”