BoC: Hurdle to further easing is quite high - Westpac

Sean Callow, Research Analyst at Westpac, notes that the Bank of Canada’s overnight rate has been held steady since July 2015 when it was cut from 1.0% to 0.75%.

Key Quotes

“At its July 2016 meeting, the BoC was a little more optimistic than expected by markets. While cutting their GDP forecasts, the bank insisted that “the underlying forces that underpin stronger growth in Canada are intact” and that the economy was adjusting to lower oil prices.

The BoC argues that “(g)rowing demand for Canadian exports should lead to increased investment and new businesses being created.” It sees the risks to the inflation outlook as roughly balanced and is keeping a wary eye on “household indebtedness and housing, particularly in the Greater Vancouver and Toronto markets.”

This gives the clear impression that the hurdle to further easing is quite high. Markets place <20% chance on another rate cut by year-end.”