Bank of Canada on hold, but strikes a cautious tone – Nomura

By FXStreet Analysts at Nomura noted, that as widely expected, the Bank of Canada (BoC) kept its policy rate unchanged at 0.5% and reiterated its neutral policy stance, saying that “the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate”.

Key Quotes:

“This suggests that the BoC is not considering any changes to monetary policy for the foreseeable future. Interestingly, while the BoC upgraded its forecast for 2016, the statement remains very cautious. On the global economy, the BoC now believes that global growth is expected to be weaker than in the January MPR. Moreover, while the US economy is expected to “regain momentum”, there is a lower level of activity than previously expected and a composition of growth “that is less favourable for Canadian exports”.

This means a weaker contribution to growth from net exports. On the domestic economy, the BoC acknowledges that growth in the first quarter will be “unexpectedly strong”, with the BoC expecting 2.8% q-o-q ar. However, the BoC also cautioned that “some of that strength is due to temporary factors and is likely to reverse in the second quarter”, with growth expected at 1.0% q-o-q ar.

On business investment, …read more

Source:: FX Street