A preview of the January 20 Bank of Canada monetary policy meeting from Goldman Sachs
- We are downgrading our growth forecast for 2016 to 1.5 percent
- Risks arguably tilted to the downside
- There are no red flags this time around ... another year of weak growth (2015 was likely around 1.2 percent) argues for taking action sooner rather than later
- We expect another 25 bps cut on January 20, amid a material downgrade in the growth outlook
- As oil prices have fallen, expectations for additional easing have grown
- At this point, the market is discounting a 60 percent chance of a cut, up from 25 percent at the turn of the year
- Policy makers always have a tricky relationship with their currency and the BoC may fear that easing now may contribute to further outsized weakness in CAD
- However, our preference is to stick with fundamentals, which are fo a significantly weaker growth outlook, and hope that the BoC is disciplined enouah to ignore price action
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The BOC rate statement and Monetary Policy Report is due at 1500GMT on Wednesday 20 January 2016
