Bank of Canada: a message decidedly dovish – NFB

As expected, today the Bank of Canada (BoC) left the key interest rate unchanged at 1.75%. According to Krishen Rangasamy and Paul-André Pinsonnault, analysts at National Bank of Canada, the BoC kept its options open for the near future. They continue to expect the central bank to remain on hold. 

Key Quotes:

“While the central bank raised its 2019 growth forecast for Canada, its message was decidedly dovish. The BoC is concerned about trade-related uncertainties and their impacts on exports and investment, and potential spillovers beyond manufacturing. The central bank did not seem pleased either with the Canadian dollar’s resilience.”

“The central bank estimated the output gap between -1% and 0% at the end of Q3, consistent with an observed annual inflation rate near 2% in the quarter. With the BoC forecasting growth near potential in 2020 and 2021, it expects the “current modest output gap will narrow over the projection horizon”. But note that the BoC tends to incorporate fiscal measures in its forecasts only when they are officially announced. In other words, if as we expect the new federal parliament delivers some fiscal stimulus next year, excess slack could disappear sooner than what the BoC is projecting.”

“We continue to expect the central bank to refrain from cutting interest rates over the near to medium term.”