Highlights of the Bank of Canada rate decision on March 5, 2014:
- Previously the Bank of Canada had said downside risks had ‘grown in importance’
- No mention of the Canadian dollar, some supporting documents in previous decision had mentioned the high loonie
- The timing and direction of the next change to the policy rate will depend on how new information influences this balance of risks
- The global economy is evolving largely as anticipated
- Recent US data have been softer, largely owing to weather effects
- Inflation still largely expected to follow path outlined in January although recent readings slightly higher than expected
USD/CAD kicked higher on the decision but there isn’t much here to digest. The difference between inflation risks having ‘grown in importance’ versus ‘remain important’ is marginal, if anything. There was some speculation (including from me) they might shift to a more neutral stance because of high inflation readings but they’ve reiterated that the path is largely unchanged.
Bottom line: The BOC has largely brushed aside higher readings on inflation, growth and employment and has stuck to its January forecasts. If data remains upbeat, the BOC will be forced to revert back to a neutral stance.
