Bank of Canada to keep rates on hold; next move is up: poll

Thu Apr 9, 2015 11:37am EDT
 
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By Leah Schnurr and Anu Bararia

OTTAWA/BENGALURU (Reuters) - One rate cut is probably enough for the Bank of Canada, which is no longer expected to follow up January's surprise move and instead is likely to see if the economy recovers after a rough start to the year, a Reuters poll showed.

The latest consensus forecast from economists marks a shift from a Reuters poll in February, when most anticipated the central bank to trim rates once more by midyear.

The median forecast of about 40 economists found rates would stay at 0.75 percent through the first half of next year. They expect the next move to be a rate hike, to 1 percent in the third quarter of 2016, ending next year at 1.25 percent.

BoC Governor Stephen Poloz recently said the economic damage from the collapse in oil prices could occur mostly in the beginning of the year.

That suggests that, while analysts expect the central bank is expected to lower its forecast of 1.5 percent growth for the first quarter, it will look past that slowdown since oil has now stabilized and is seen rising gradually later this year. [O/POLL]

For now, Canadian inflation remains low, part of a global trend accentuated by the tumble in oil prices. Inflation sank to a one-year low of 1 percent in January, the bottom of the BoC's target range, and held there in February.

The bank cut rates to 0.75 percent after keeping them on hold for more than four years, calling it "insurance" against the economic damage from the more than 60 percent drop in the price of oil, one of Canada's major exports.

While the BoC was one of many global central banks that sprang a surprise policy easing around the start of the year, the move took markets completely off guard and hit the Canadian dollar, which has fallen 8 percent so far this year.   Continued...