Optimistic BOC Sees Output Gap Closing Earlier - SEB

Optimistic BOC Sees Output Gap Closing Earlier - SEB

13 April 2016, 20:03
Vasilii Apostolidi
0
27

As expected the BOC held its target for the overnight rate unchanged at 0.50% at today’s meeting. After a slow start to 2016, the US economy is expected to regain momentum and global growth is expected to strengthen too according to the Bank. Canadian growth, meanwhile, appears to have been unexpectedly strong in the first quarter; although temporary factors seem to have boosted growth to a certain degree. Looking ahead, the economy’s ongoing structural adjustment to the oil price shock will dampen activity and result in a lower estimate of potential growth. Meanwhile the new fiscal stimulus will have a notable positive impact on GDP and taken together the Bank’s judgement is now that the output gap could close somewhat earlier than the Bank had anticipated in January, likely in the second half of 2017. Taken together, the real GDP growth forecast was raised to 1.7% from 1.4% this year and lowered just a tad to 2.3% from 2.4% for 2017.

 

Copy signals, Trade and Earn $ on Forex4you - https://www.share4you.com/en/?affid=0fd9105         

 

Inflation in Canada continues to track largely as the Bank anticipated and the risks the risks to the inflation outlook are roughly balanced. Given that the output gap is closing somewhat earlier in these new projections, inflation will hold at the target somewhat earlier than anticipated in January; in the second half of 2017. So while the Bank is fine with the current monetary policy stance for now, arguably the next step is to raise rates. While we keep our forecast of unchanged rates in 2016-17 for now, the risks are tilted towards rate normalization next year which is not in the market at the moment.

Share it with friends: