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On Thursday, after the monetary policy meeting, the Bank of Canada (BoC) left, as expected, the interest rate unchanged at the lower effective bound of 0.25%. It was the last meeting with Poloz as governor. Josh Nye, Senior Economist at RBC Economics, point out the BoC made only minor policy tweaks. 

Key Quotes: 

 “Today is Governor Macklem’s first day on the job, though this morning’s policy statement is a hold-over from the Poloz era—a note accompanying the statement said Macklem participated in Governing Council’s deliberations as an observer and endorsed its policy decisions.  Those decisions included leaving the overnight rate at the “effective lower bound” of 0.25% and reducing the frequency of some of the central bank’s liquidity-providing programs. The latter is a positive development as it signals the BoC is comfortable enough with market functioning to scale back some of the support put in place since March.”

“As the BoC shift its focus from crisis management to “supporting the resumption of growth in output and employment,” we think QE will be key to its stimulus efforts.”

“All the BoC could say is that temporary factors (including a sharp drop in gasoline prices) will keep inflation below its 1-3% target band in the near-term. Recent comments suggest the BoC is more concerned about underlying inflation remaining below its target than above, and we agree that an extended period of low inflation is a greater risk than excessive inflation. That should keep the BoC’s foot to the floor with low interest rates and asset purchases in the early stages of the Macklem era.”