The Bank of Canada is set to meet next week for its monetary policy decision. The central bank is likely to keep its overnight lending rate on hold at 0.5 percent in terms. The larger issue is whether the bias would be incrementally changed, especially in the context of a pile-on that has been shorting the Canadian dollar and going long on the front-end of the Canada curve at least until very recent developments, noted Scotiabank in a research report.
The economic growth is currently tracking around a 4 percent annualized print that is consistent with revised expectations of BoC last month and a bit higher than the 2.5 percent projection in January. Economic growth has surpassed everyone’s projections in the first quarter as compared to the beginning of the year.
Meanwhile, the central bank is expected to reiterate that subdued first quarter economic growth of the U.S. was temporary and that the economic growth drivers continue to be strong, stated Scotiabank. Very early tracking of the second quarter growth data underpins a materially stronger economy than the paltry 0.7 percent annualized growth in the first quarter.
“Clearly US political and policy risks overhang the outlook for markets and the US economy such that the BoC won’t be signaling any greater optimism at this highly uncertain juncture”, added Scotiabank.
