Canada: Cautious optimism – ING

By FXStreet James Knightley, Senior Economist at ING, notes that while acknowledging the economic and personal costs of the Alberta wildfires, the BoC remain upbeat on the prospects for growth.

Key Quotes

“The Bank of Canada left monetary policy unchanged yesterday, as widely expected, and maintained a similar positive upbeat assessment to last month’s accompanying statement. Citing encouraging economic developments in the US, rising oil prices and “accommodative” financial conditions they believe that the global economy is moving broadly in line with their projections. However, they did warn that the domestic growth story in 2Q16 will be weaker than anticipated because of “the devastating Alberta wildfires”, which led to a loss of property and a halt in oil production. This, they believe, will knock around 1.25 percentage points off 2Q16 GDP growth. However, the rebuilding work that will be required and the re-starting of oil production should lead to a strong rebound in economic activity during 3Q and 4Q16.

Inflation is currently close to the 2% target at 1.7% while core inflation is slightly above at 2.2%. We expect headline inflation to break above 2% quite soon given the ongoing increases in retail gasoline prices together with the lagged effects of Canadian dollar …read more

Source:: FX Street