Bank of Canada likely to keep rates unchanged in July – TD Economics

Bank of Canada is expected to stay on hold when it meets on 12 July. According to a TD Economics research report, the central bank is expected to keep rates unchanged, but it is a close call. In spite the current market pricing, the Bank’s risk management framework favors an October hike over July.

Conditions in the wider economy are still greatly in line with April MPR projections and such a rapid shift in tone over such a short period absent of major shock risks hurting the BoC’s forward looking credibility. Furthermore, inflation is weaker than in the April MPR. Looking past the central bank’s decision to leave rates on hold, the rest of the statement and MPR should affirm a hawkish tone conveyed in Wilkins’ speech, citing the strength of the labor market and domestic demand while playing down weak levels of inflation as a lagged symptom of prior excess slack, stated TD Economics.

“In the press conference, Poloz will likely acknowledge that removing accommodation was discussed and that future rate hikes will be gradual and consistent with the evolution of economic data, particularly inflation”, added TD Economics.

At 21:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was highly bullish at 100.224, while the FxWirePro's Hourly Strength Index US Dollar was neutral at -18.8352. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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