Bank of Canada: We see the rate unchanged for the rest of the year - NBF

The Bank of Canada left its key interest rate unchanged at 1.75% as expected. Paul-André Pinsonnault and Jocelyn Paquet, analysts at National Bank of Canada, the central bank will keep the policy rate unchanged for the rest of the year. 

Key Quotes:

“Mr. Poloz reminded us that there could also be a positive resolution to the current situation. Still, a deterioration of the outlook could translate into lower growth and higher prices. This would be a difficult situation. Mr. Poloz went further suggesting that financial markets may not fully recognize the complexity of such a situation. Indeed, in the case of an escalation of trade conflicts that would be a negative for productivity and corporate earnings at the same time that it may call for lower rate to support growth. The Bank is monitoring incoming data and will adjust its policy stance as needed.”

“The Bank of Canada erred on the dovish side today considering the strength of the domestic economy. While it revised its Q2 growth forecast substantially, this was partially offset by a quite conservative projection for Q3 (1.5%). Considering what looks like a healthy handoff from Q2, there might still be room for an upside surprise going forward.”

“The Bank is welladvised to keep monitoring developments on the trade front and stay put while other central banks are sending dovish signals in response to weaker data in the respective jurisdictions. In that context, and with core inflation well anchored within the BoC’s target range, we see the central bank leaving its policy stance unchanged for the rest of the year.”