The decision is as expected

The BOC has kept rates unchanged at 1.0%. That is as expected.

  • BOC pledges caution on future rate increases
  • Sees economy Running close potential over next two years
  • Projects output gap at zero in the third quarter of 2017
  • Less monetary stimulus will likely be required over time
  • Housing spending to slow on policy changes, higher rates
  • Lifts 2017, 2018 GDP forecasts to 3.1% and 2.1% from 2.8% and 2% respectively
  • Labor market slack provides room for growth without inflation
  • NAFTA talks create substantial uncertainty for Bank of Canada Outlook
  • Sees inflation rising to 2% by 2H of 2018, later than expected due to higher C$
  • Inflation has picked up in recent months
  • There could be room for more economic growth than projected without inflation rising materially above target
  • Lowers Q3 growth forecast to 1.8% from 2%.
  • Sees Q4 at 2.5%.
  • Sees slower growth due to higher C$

The USDCAD has roared higher on the more cautious report. If the C$ was too high, it is getting weaker.