Bank of Canada kept its policy rate unchanged at 0.75% this morning. The Bank continues to expect both economic growth and inflation to evolve largely in line with past communications, resulting in the output gap closing by the end of 2016 and inflation returning to the 2% target around the same time.
The decision and accompanying statement reconfirmed recent Bank of Canada communications - in the Bank's view, the largest shock to the Canadian economy is now behind us. First quarter real GDP, which will be released this Friday, is likely to have been effectively flat. Growth is anticipated to resume this quarter, accelerating further into the end of the year.
"Our base case continues to anticipate a steady closing of the Canadian output gap, and a return of inflation to close to the 2% target by the end of 2016, broadly consistent with the Bank of Canada's outlook. While our expectation is for rates to remain on hold, the outlook for Canadian growth remains in many ways contingent on external developments, particularly the evolution of both crude oil prices and the U.S. economy." said TD Economics in a report
