Andrew Kelvin, chief Canada strategist at TD Securities, suggests that heavy market pricing for Fed cuts has started to bring the Bank of Canada back into focus, as the BoC has historically followed the Fed in most easing cycles.
Key Quotes
“As exports have become a smaller part of the economic mix, the BoC will feasibly have more scope for divergence than in past cycles – but over long horizons US activity has been a reliable predictor of Canadian growth.”
“Our basic assumption is that the BoC remains data dependent, and will only move to cut rates if the domestic outlook weakens. However, the Bank only has a thin margin of error to work with before the domestic outlook forces the BoC into rate cuts; if the Fed eases and US growth slows, the current Bank of Canada policy stance will become untenable.”
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