BoC has sent a mixed message in yesterday’s statement. Although the next rate adjustment remains a hike, the timing remains data-dependent and hinged on a number of uncertainties, including NAFTA negotiations and geopolitical tensions, something critical to Canada due to its position as oil exporter. Policymakers upgraded the assessment over the global economic outlook and remained optimistic over the domestic developments. However, they revised lower the forecast of GDP growth this year. The market has priced in 34% chance of a rate hike in May. We expect the next move to come in June.
BOC left the overnight rate unchanged at 1.25% in April. Policymakers maintained a cautious tone, noting that future monetary policy change would be “guided by incoming data”. On inflation, the members acknowledged recent improvement has been “consistent with an economy operating with little slack”.
On economic forecasts, BOC revised higher global growth outlook to +3.8% for 2018 and +3.6% for 2019, up from previous forecasts of +3.6% and +3.5%, respectively. Growth is expected to ease to +3.4% in 2020. Growth in the US was revised higher to +2.7% for both this year and in 2019, from +2.6% and +2.3%, respectively. Growth is expected to ease to +2% in 2020.
In Canada, the members revised lower the growth forecast, by -0.2 percentage point, to + 2% for this year, before upgrading it by +0.5 percentage point, to 2.1%. Growth in 2020 is expected to ease to +1.8%. The member revised the CPI forecast higher to +2.3% for this year (+2% previous) and +2.1% for both 2019 (unchanged from previously) and 2020.