Canadian data have been generally strong in April. Employment, retail sales and housing starts all came stronger than expected. Core CPI inflation has also surprised on the upside reaching 2.4% (YoY), helped by weaker currency. The BOC is likely to take these positive developments as a confirmation of its economic outlook. The Bank expects the effect of the oil price shock to be front-loaded with growth projected to pick up later this year. “We therefore expect the BOC to stay comfortably on hold over the next few meetings. However, we continue to believe longer-term risks still argue for continuation of monetary easing. Our economists believe the negative effects form the oil price shocks may last longer than expected by the BOC. As a result, we still expect another BOC cut later this year, with October being our base case scenario.” – says BofA Merrill Lynch
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