The tone of the BoC’s statement was more cautious than expected as the Bank put significant emphasis on weakness elsewhere in the global economy, explained analysts at TD Securities.
“The MPR balanced mark-to-market upgrades for 2019 GDP and CPI with a more downbeat outlook for next year. Softer global growth was the primary factor, and the Bank also noted that trade risks are now tilted to the downside.”
“BoC highlighted concerns from global factors and downgraded growth. This is a dovish hold. 2s are 10 bps lower on the day, in line with our dovish scenario expectation. The market’s reaction for Canada to outperform the US by 5bps in 10s and 7bps in 2s makes sense.”
“In that context, we were surprised to see the Bank lean so heavily on a deteriorating global outlook in the messaging.”