No rate cut from the BOC, as was mostly expected.
- Risks to inflation outlook 'are now roughly balanced'
- Bond market pricing suggested about an 8% chance of a cut
That's not as dovish as some people were looking for.
- Sees return to full capacity at end-2016 (same as before)
- Lowers 2015 growth estimate to 1.9% from 2.1%
- Boosts 2016 to 2.5% from 2.4%
- Lower oil to be more front-loaded than expected but overall impact will be the same
- Ultimate size of oil price impact will need to be monitored closely
- As oil shock wears off, stronger non-energy exports, investment and labor markets will re-emerge as dominant trend around mid-year
- Weak Q1 has led to weakening of output gap but gap will be back on previous trajectory later this year as growth recovers
- Boosts estimate of output gap by quarter-point
- Raises total CPI forecast to 1.0% from 0.5% in Q1
- Sees Q3 inflation at 0.8% vs 0.3% prior
- Sees Q4 inflation at 0.9% from 0.5% prior
This sounds like the Bank of Canada isn't going to cut further. It's bad news for USD/CAD.