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.