Bank of Canada to stand pat in May, likely to hike rates in Q3 2018

The Bank of Canada is set to meet tomorrow for its policy meeting. According to a Wells Fargo research report, the Canadian central bank is expected to stay on hold. After raising rates in January, the Bank of Canada had subsequently remained on hold in March and April, and several analysts expect that the central bank will keep policy unchanged again tomorrow.

Policymakers did not express any particular urgency to hike rates in the statement they released after the last policy meeting in April, although they did appear to show that further tightening would be appropriate later. Indeed, the BoC is expected to hike rates again in the third quarter, stated Wells Fargo.

Meanwhile, the first quarter economic growth data of Canada is set to be released later in the week. In the prior week, the real GDP had risen at an annualized rate of 1.7 percent. The economy is expected to have expanded at a roughly similar rate in the first quarter.

“Rates remain low in a historical context, and we believe that the BoC will eventually need to tighten further to return rates to a more “neutral” (i.e., neither stimulating nor restraining the economy) setting”, added Wells Fargo.

At 20:00 GMT the FxWirePro's Hourly Strength Index of Canadian Dollar was neutral at -10.4865, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 48.0356. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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