BoC Preview: Expect no change in policy but outlook uncertainty remains elevated - Nomura

Analysts at Nomura expect the BoC to leave its policy rate unchanged at today’s meeting and believe that it will reiterate that risks on inflation remain roughly balanced.

Key Quotes

“Nevertheless, the statement is likely to focus on the fact that uncertainty remains very high especially regarding US economic policy.”

“Data since the January meeting have been generally on the growth side and point to strong growth at the end of 2016. However, it remains to be seen how much momentum will be carried into 2017, as the improvement in non-energy exports and manufacturing has been modest so far. On the flip side, the latest inflation report showed a very strong increase in headline inflation while the core measures stabilised, albeit at a low level.”

“It may be important for the market to note that there is no press conference following this week’s meeting. This means that we are unlikely to be reminded by the BoC that rate cuts remain on the table. As we have said in the past, taking into account the large downside risk to the outlook, it is normal for the central bank not to exclude any policy response, ie to close the door to a rate cut in case it becomes needed.”

“We remain positive on CAD and continue to believe that USD/CAD could end Q1 at around 1.28, supported by an increase in commodity prices, continued improvement in the Canadian economic outlook and the view that USD is unlikely to appreciate meaningfully.”