TORONTO (Reuters) - The Bank of Canada maintained its key overnight interest rate at 1.75% as expected on Wednesday but opened the door to a possible cut should a slowdown in Canadian growth drag on.
SIMON HARVEY, FX MARKET ANALYST FOR MONEX EUROPE AND MONEX CANADA
“The fact that the Bank of Canada didn’t include the word appropriate in its statement says it all. Rates are going to change at some point this year is what markets have taken out of it.”
“Growth is the major concern at the moment even though the external headwinds have abated, so they are keeping this dovish bias to policy rates at the moment although it doesn’t necessarily mean that they are going to actually cut rates. What we have seen from the Bank of Canada recently is that communications does much of the heavy lifting rather than actions.”
“The Bank of Canada struck a somewhat cautious tone insofar as it acknowledged the weakness in the fourth quarter of last year and questioned how persistent that weakness was. It did suggest that some of the factors depressing activity towards the end of the last year were temporary, so a rebound should be expected. That’s why they left rates unchanged in today’s announcement.
“They were slightly more downbeat than what the Governor had suggested in his last speech but is in line with our forecast that the Bank will likely need to trim rates in spring of this year.”
“It’s a bit more dovish than I thought they were going to sound, given the governor’s tone in his fireside chat earlier in the month. I don’t disagree with anything he’s saying here - I’m just a little surprised by the sudden change in tone.”
“We have been seeing very poor data coming out of Canada over the last six weeks ... It really is just the constant drip of disappointing real activity data.”
Reporting by Allison Martell, Nichola Saminather; Editing by Denny Thomas