FXStreet (Delhi) – Brian DePratto, Economist at TDS, notes that the Bank of Canada left its key policy rate unchanged at 0.5%, despite a weaker economic outlook relative to their October projections.
Key Quotes
“Growth for 2016 is now forecast to be just 1.4%, 0.6% lower than anticipated in the previous Monetary Policy Report (MPR). The Bank continues to see a marked acceleration in growth in 2017, to 2.4%.
Much of the near-term weakness is attributed to lower commodity prices and temporary factors, while the Bank also reiterated that “The declines in Canada’s terms of trade and in the value of the Canadian dollar over the past year and a half have set in motion complex adjustments”.
The Bank sees overall inflation as returning to near target by the end of 2017, and re-stated its view that absent exchange rate moves, core inflation would be closer to 1.5%, rather than the actual 2.0% pace. Of note, in a break from past MPRs, inflation is forecast to reach 1.9% by the end of the forecast, rather than reaching the 2.0% target.
In line with a weakened near-term outlook, and the absence of additional monetary stimulus, the Bank of Canada expects that economic slack will be eliminated only at the end of 2017, rather than mid-2017 (as expected in the October MPR).”
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