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Analysts at Rabobank note that the Bank of Canada raised the policy rate 25bp to 1.50% as was widely expected, while maintaining a cautious tone.

Key Quotes

“We maintain the same view held before this meeting; the BoC has a bias to raise rates and will do so if the market is pricing it in but we doubt data will allow to do so again this year.”

“Headline data may be relatively upbeat but a scratch below the surface unveils a very different picture with consumers being squeezed by higher debt servicing costs and rising cost-push inflation, while we see the outlook for trade and investment as uncertain at best.”

“The BoC revised down its forecast for GDP growth this year by 0.1ppt to 2.0% while revising up the outlook for 2019 by 0.2ppt to 2.2%.”

“The BoC revised up its forecast for CPI inflation this year by 0.1ppt to 2.5% while keeping its 2019 forecast steady at 2.1%.”

“The press conference was more dovish than the statement that accompanied the decision.”