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14 Apr 2015
BoC to keep rates steady, nudge down growth forecasts – ING
FXStreet (Barcelona) - Canadian data has been neither here nor there recently, which suggests the Bank of Canada Governor Poloz will keep rates on hold on Wednesday, notes Rob Carnell of ING.
Key Quotes
“At the beginning of the year it appeared that oil was on the path to a reasonable recovery, but it is struggling to push through the US$62/bbl threshold with Brent averaging US$56/bbl in April so far. With such a reliance on oil, the longer these levels persist, the longer the Canadian economy will suffer from poor to average data.”
“Capital expenditure in oil and gas, which makes up 29.6% of total business investment, is being slashed across the sector and projects are being shelved by companies like Royal Dutch Shell and Petronas.”
“On the surface employment gains in March provided some positivity, surpassing expectations and delivering 27,800 new jobs. But looking past the headline, these increases were driven by part-time jobs with full-time employment actually falling by 28,200. Honing in on employment in natural resources, the data came in on the upside with an increase of 6,300 jobs in March despite employment in the industry falling 4.3% YoY.”
“The Bank of Canada will want to look through the effects of low oil prices on inflation and growth and hope for US strength paired with a weak CAD to pull the economy through. But with average oil prices hanging below the Bank’s previous MPR assumptions, we expect them to nudge growth forecasts down on Wednesday.”
“Whilst we forecast that Poloz will keep the policy rate on hold at 0.75% to wait and see how the economy develops, we argue that strong forthcoming US data signalling near-term rate hikes will push USD/CAD up to 1.30 in 2H15.”
Key Quotes
“At the beginning of the year it appeared that oil was on the path to a reasonable recovery, but it is struggling to push through the US$62/bbl threshold with Brent averaging US$56/bbl in April so far. With such a reliance on oil, the longer these levels persist, the longer the Canadian economy will suffer from poor to average data.”
“Capital expenditure in oil and gas, which makes up 29.6% of total business investment, is being slashed across the sector and projects are being shelved by companies like Royal Dutch Shell and Petronas.”
“On the surface employment gains in March provided some positivity, surpassing expectations and delivering 27,800 new jobs. But looking past the headline, these increases were driven by part-time jobs with full-time employment actually falling by 28,200. Honing in on employment in natural resources, the data came in on the upside with an increase of 6,300 jobs in March despite employment in the industry falling 4.3% YoY.”
“The Bank of Canada will want to look through the effects of low oil prices on inflation and growth and hope for US strength paired with a weak CAD to pull the economy through. But with average oil prices hanging below the Bank’s previous MPR assumptions, we expect them to nudge growth forecasts down on Wednesday.”
“Whilst we forecast that Poloz will keep the policy rate on hold at 0.75% to wait and see how the economy develops, we argue that strong forthcoming US data signalling near-term rate hikes will push USD/CAD up to 1.30 in 2H15.”