BoC Leaves Rates Unchanged, Lowers Growth Forecast For 2010
Posted 01-19-2010 at 11:21 AM by DailyFX
Tags boc, currencies, dailyfx, forex, trading
The Bank of Canada kept their benchmark at a record low 0.25%, and reconfirmed its commitment to remain on hold until June, 2010. The central bank has raises its outlook for global growth but still see it being driven by stimulus efforts and the prevailing concerns is that once it begins to dissipate downside risks will increase.
The Bank of Canada kept their benchmark at a record low 0.25%, and reconfirmed its commitment to remain on hold until June, 2010. The central bank has raises its outlook for global growth but still see it being driven by stimulus efforts and the prevailing concerns is that once it begins to dissipate downside risks will increase. Therefore, forecasts for domestic growth were lowered to 2.9% from 3.0% in 2010, and raised to 3.5% from 3.3% in 2011. Policy makers stated that “In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility” as downside risks remain including “a more protracted global recovery and persistent strength of the Canadian dollar that could act as a significant further drag on growth and put additional downward pressure on inflation”. Currently there is little expectation that the committee would consider lowering rates, but the fact that it remains an option signals that a rate hike may be further in the distance than previously forecasted. Therefore, markets shouldn’t expect a change in policy in June, unless inflation risks significantly increase. Policy makers don’t see consumer prices reaching their target until the third quarter of 2011 despite core price accelerating faster than expected, as there remains considerable slack with the economy operating 3.25% below capacity. There was an immediate bearish “loonie” reaction to the dovish central bank statements but lack of conviction failed to drive the USD/CAD above trend line resistance.
Read more: DailyFX - BoC Leaves Rates Unchanged, Lowers Growth Forecast For 2010 DailyFX - BoC Leaves Rates Unchanged, Lowers Growth Forecast For 2010
The Bank of Canada kept their benchmark at a record low 0.25%, and reconfirmed its commitment to remain on hold until June, 2010. The central bank has raises its outlook for global growth but still see it being driven by stimulus efforts and the prevailing concerns is that once it begins to dissipate downside risks will increase. Therefore, forecasts for domestic growth were lowered to 2.9% from 3.0% in 2010, and raised to 3.5% from 3.3% in 2011. Policy makers stated that “In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility” as downside risks remain including “a more protracted global recovery and persistent strength of the Canadian dollar that could act as a significant further drag on growth and put additional downward pressure on inflation”. Currently there is little expectation that the committee would consider lowering rates, but the fact that it remains an option signals that a rate hike may be further in the distance than previously forecasted. Therefore, markets shouldn’t expect a change in policy in June, unless inflation risks significantly increase. Policy makers don’t see consumer prices reaching their target until the third quarter of 2011 despite core price accelerating faster than expected, as there remains considerable slack with the economy operating 3.25% below capacity. There was an immediate bearish “loonie” reaction to the dovish central bank statements but lack of conviction failed to drive the USD/CAD above trend line resistance.
Read more: DailyFX - BoC Leaves Rates Unchanged, Lowers Growth Forecast For 2010 DailyFX - BoC Leaves Rates Unchanged, Lowers Growth Forecast For 2010
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