The Bank of Canada HAD to raise its 2016 growth forecast, since the Governor's boss, Minister Morneau, is out touting the benefits of fiscal stimulus, and December/January GDP surprised on the upside.
With that in mind, this was about as small a forecast upgrade as they could have chosen, with the new 1.7% outlook relying on a deceleration after a Q1 that the Bank sees, as we do, partly attributable to one-off factors. Notable was the Bank's willingness to mention the strength of the C$ as resulting in a downgrade in their projected path for non-energy exports, obviously an effort to caution markets about taking the loonie much further.
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With next year's growth still at 2.3%, the output gap is projected to close in the second half of 2017, still a long way off and a reason why we don't see the Bank raising rates until Q4 next year.
Overall, an upgrade in growth that was a bit less than might have been expected, and a cautionary mention of the currency is a reason to fade any further rally, given that a stronger loonie could push back the timetable for a return to higher rates.