CAD: Setting Up for Bank of Canada - TDS
Analysts at TD shares the universal consensus expectation for the Bank of Canada to hold its overnight rate unchanged at 0.50%.
Key Quotes
“The
focus will therefore fall to the tone of the communique and the
accompanying MPR (Governor Poloz will also give a press conference later
in the morning). Despite a positive turn in the domestic data, TD
expects that the Bank will err on the side of caution in noting a more
challenging outlook over a longer horizon. This echoes recent rhetoric
from the Federal Reserve and the IMF and will be reflected in
prospective forecast revisions raising 2016Q1 substantially (and filter
into a higher annual average for 2016) but cutting growth in 2017 above
and beyond the lift from the fiscal stimulus announced in the Federal
Budget. The net impact, including a positive adjustment to potential
output reflecting government infrastructure investment, could result in
pushing the closure of the output gap into 2018.
A key
uncertainty is how the Bank will address the currency which is exerting
around a 0.5% drag on growth relative to January. The Bank is expected
to acknowledge a stronger currency as a statement of fact but will stop
short of expressing explicit concern. Collectively the Bank's message
will be interpreted with a marginally dovish bias though those looking
for an even more aggressive message designed to weaken the currency will
be disappointed.”