According to National Bank of Canada analysts, the Bank of Canada will keep the key overnight rate unchanged at next week’s meeting.
Key Quotes:
“We expect the Bank of Canada to leave its overnight rate unchanged next week. As BoC Governor Stephen Poloz pointed out in the past, the big picture is what matters for policy decisions. On the inflation front, though the headline CPI surprised on the upside in July with a 12-month print of 3.0%, the jump was due essentially to an atypical 15% m/m surge in intercity transportation costs. The inflation measures used by the BoC to filter out such noise suggest annual inflation was a tamer 2.0% and showed no sign of acceleration.”
“Regarding GDP, where the Canadian economy grew 2.9% in Q2, a tick higher than the BoC’s projection, it is expected to slow down in Q3. Where NAFTA is concerned, Poloz has stated in the past that the BoC would need to see how business investments reacted to a positive resolution of current negotiations.”
“The big picture does not suggest the need for the BoC to depart from its gradual datadependent approach to policy normalization. Waiting until October for its next policy rate hike would be more consistent with this game plan.”
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