BoC likely to leave rates unchanged at 1.75% – TDS

Analysts at TD Securities suggest that the Bank of Canada will publish the policy statement and Monetary Policy Report at 10:00 ET on April 24^th and they are looking for the Bank to leaves rates unchanged at 1.75%, although new projections and a change to the forward-looking components of the statement should give a dovish tone.

Key Quotes

“At 11:15 ET we will hear from Governor Poloz and Senior Deputy Governor Wilkins in a press conference.”

“We no longer expect further rate hikes from the Bank of Canada, meaning the overnight rate will top out at 1.75% this cycle. Q4 GDP was the nail in the coffin, as the muted growth figures and expectations for sub-trend growth in Q1 imply a wider output gap that will not close before the end of 2020.”

“Furthermore, recent developments suggest that homeowners are still struggling to adapt to higher rates, with existing home sales holding near a 7-year low in March while household leverage sits at a record high. Core inflation firmed to 1.97% in March but most of the move was driven by base-effects and we see little scope for further gains given the muted growth backdrop.”

“The labour market remains the one bright spot in the domestic economy and while we did lose 7k jobs in March, the six-month average is still elevated at 36k. Furthermore, wages have finally started to pick up off the lows but this alone is not enough to keep the BoC on a tightening path.”