Highlights of the BOC’s Monetary Policy Report:
- Continues to see core inflation hitting target in Q1 2016
- Total CPI will be closer to 2% in coming months due to temporary upward pressure from energy, lower CAD
- Lower CAD over past year has put temporary upward pressure on inflation, offsetting supply and competition
- Sees 2014 growth at 2.3% vs 2.5% prior (consensus is 2.3%)
- Keeps 2015 growth projection at 2.5%
- Says 2014 total inflation higher than forecast
- Total CPI 1.6% in Q2 vs 1.2% prior
- Core CPI in Q2 1.2%, unchanged
- Exports to pick up but profile lower than in Jan, business investment also lower
- Sees soft landing in housing
- Lower CAD should support exports
- US 2014 forecast 2.8% vs 3.0% prior
- Europe forecast 1.1% vs 0.9% prior
- Global forecast 3.3% vs 3.4% prior
- Full text of the MPR
Bringing forward that inflation forecast is the big change. That’s hawkish. The knee jerk in USD/CAD is higher but I don’t see it. Inflation forecasts are significantly higher and that should squash any talk of rate cuts.
