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20 Oct 2014
BoC could inject an air of caution - BAML
FXStreet (Barcelona) - Analysts at Bank of America Merrill Lynch explained that they are expecting the BoC to leave rates on hold, maintaining a neutral stance.
Key Quotes:
“Since the last interest rate decision, inflation risks are unchanged on balance: stronger near-term CPI is offset by medium-term risks to growth and the closing of the output gap from weaker external demand."
"On the financial stability side, risks remain elevated, with household leverage high and existing home sales rising briskly along with prices. That should leave the balance of risks roughly unchanged, motivating no shift in the BoC's neutral policy stance."
"Nonetheless, the BoC may adopt a more cautious tone in its discussion of the outlook”
"The BoC has an upbeat forecast that business investment will add 0.6ppt to GDP growth next year after adding nothing to growth this year - a forecast that looks increasingly like a pipe dream unless energy prices post a huge recovery”.
“Weaker energy prices also Canada's terms of trade and national income as Canada is a net energy exporter - a drag that is only partly offset by a cheaper C$ that could help exports on the margin. On net, the BoC will probably trim its 2015 outlook for capital spending in the Monetary Policy Report and inject some caution into its discussion of the economic outlook. "
Key Quotes:
“Since the last interest rate decision, inflation risks are unchanged on balance: stronger near-term CPI is offset by medium-term risks to growth and the closing of the output gap from weaker external demand."
"On the financial stability side, risks remain elevated, with household leverage high and existing home sales rising briskly along with prices. That should leave the balance of risks roughly unchanged, motivating no shift in the BoC's neutral policy stance."
"Nonetheless, the BoC may adopt a more cautious tone in its discussion of the outlook”
"The BoC has an upbeat forecast that business investment will add 0.6ppt to GDP growth next year after adding nothing to growth this year - a forecast that looks increasingly like a pipe dream unless energy prices post a huge recovery”.
“Weaker energy prices also Canada's terms of trade and national income as Canada is a net energy exporter - a drag that is only partly offset by a cheaper C$ that could help exports on the margin. On net, the BoC will probably trim its 2015 outlook for capital spending in the Monetary Policy Report and inject some caution into its discussion of the economic outlook. "