In the view of the Barclays Research Team, the Bank of Canada (BOC) is expected to leave its benchmark interest rate unchanged at its monetary policy meeting due later on Wednesday at 1500 GMT.
“We expect the BoC to keep the overnight rate target unchanged at 1.75% on Wednesday and retain its cautious, data-dependent stance, with the view that interest rates will need to rise toward neutral over time.
The downside risks to the outlook that had been identified by the monetary policy committee remain lower oil prices that have weighed on the energy sector, business investment and headline inflation; uncertainty about global trade and risks of further protectionism; and indebted households and slowing housing market.
There have been positive developments since the January meeting, which could be noted in the policy statement: oil prices have partially recovered, the US and China extended their trade ceasefire, and job creation has kept a solid pace. Data last week, however, reinforced the need to be patient to evaluate the depth and broadness of the oil-induced slowdown.
GDP surprised to the downside, driven by falling business and residential investment, in line with the BoC’s January assessment, but it also showed slowing consumption. The bank will need time to monitor the pace of economic activity and is unlikely to change its rhetoric at this meeting.”