CAD: Bank of Canada in Wait-and-See Mode – Commerzbank
Dr Jörg Krämer, Chief Economist at Commerzbank. Suggests that economic risks resulting from the lower oil price had prompted the Bank of Canada (BoC) to lower key interest rates to 0.5% and no further interest rate cuts are planned at the moment.
Key Quotes
“We believe the BoC will remain sidelined as long as the CAD does not appreciate too much. For a strong CAD supports an economy that is suffering on the back of low oil prices. Moreover, the government has announced incentive programmes as additional support for the economy.
CAD depreciation since mid-2014 is also positively affecting inflation. The rate of inflation was back within the BoC’s target range recently.
The BoC’s cautious stance and ongoing uncertainty about future oil price performance should keep USD-CAD at higher levels in the short term.
In the medium term, the CAD is likely to appreciate once oil prices stabilise and the effects of the economic incentive measures unfold. By end-2017, we are looking for a first rate hike from the BoC.”
