BoC: Global developments the key to future decisions –  RBC CM

After today’s meeting, the Bank of Canada (BoC) kept its interest rate unchanged at 1.75% as most expected. Josh Nye, Senior Economist at RBC Economics Research point out the central bank statement offered no direction regarding future policy moves and he warned that gobal developments hold the key to future decisions.

Key Quotes:  

“Since its July meeting, conversation has shifted from ‘if’ to ‘when’ the BoC will join its many global peers in lowering interest rates. But that evolution wasn’t obvious in today’s policy statement, which was more neutral than expected and lent support to the Canadian dollar.”

“Global developments and their impact on Canada’s economy will receive “particular attention” when the BoC updates its forecasts in October. The combined ½ ppt add to growth from business investment and net trade in its 2020 GDP forecast looks vulnerable to a downward revision.”

 “An economy that is operating close to full capacity (thanks to a surprisingly strong Q2 GDP print), with inflation on target and wage growth picking up, has kept the BoC from committing to a future rate cut (or perhaps it’s Governor Poloz’s reluctance to provide any forward guidance).”

“The bank’s comments on the global outlook suggest the door is open to a rate cut. Our forecast assumes a move in January. We’ve been flagging growing risk of an earlier cut, which has only been diminished slightly by today’s statement.”