BoC Meeting Preview: Rate cut next week likely in bid to support economy

By FXStreet FXStreet (Mumbai) – The Bank of Canada will meet on 20th January to take rate related decisions. The markets are eager to know what path the central bank chooses as it fights low oil price on one hand and rising inflation prompted by weak loonie on the other. When the central bank had least met in December, it had decided to keep rates unchanged at 0.50 per cent. The BoC noted that “the risks to the outlook for inflation remain within the zone for which the current stance of monetary policy is appropriate”, suggesting a neutral policy stance.” The bank had at its last meeting adopted a neutral policy stance.

The oil price has slid further since the last meeting of the BoC hovering around the $30 per barrel threshold. Canada’s economy depends largely on the income earned from exporting commodities, particularly oil. The Canadian dollar was lowered to retain the attractiveness of the goods and services produced in Canada, in a bid to compensate the losses incurred as a result of low oil price. He noted that falling commodity prices were draining $50-billion from the economy. Lower currency value, it seems will be a norm for some time as …read more

Source:: FX Street