Bank of Canada: No rush to follow the Fed, but markets think next move is down - RBC CM

At today’s meeting, the Bank of Canada left as expected the key interest rate unchanged at 1.75%. The Loonie (CAD) tumbled across the board. Josh Nye, Senior Economist at RBC Economics Research, points out the BoC statement was more dovish than expected.

Key Quotes: 

“Today’s policy statement was more dovish than expected. The BoC didn’t move explicitly to an easing bias (unlike the Fed and ECB) but sounded more concerned about “persistent trade tensions” that are clouding the outlook.”

“Poloz and Co. still don’t appear to be in any rush to lower rates alongside the Fed (Powell’s comments this morning reinforced expectations for a July cut) but markets seem justified in thinking the BoC’s next move is more likely to be down than up.”

 “Concerns about trade tensions and slowing global growth received top billing in the statement, unlike in May when signs of a firming domestic economy were highlighted.”

“Inflation remains close to 2% (something the Fed and ECB can’t claim) and is expected to be sustained at the BoC’s target by the middle of next year as economic slack is absorbed.”