BoC expected to keep key rate on hold today, unlikely to adjust inflation and economic outlook

The Bank of Canada is widely anticipated to keep its interest rate on hold at 0.5% today, said Commerzbank in a research report. Focus is on whether the central bank will make statements on its future approach and in what manner. The Canadian central bank appeared quite upbeat recently, not least because of the government’s latest announcement of fiscal package. Therefore, in its previous meeting, the Bank of Canada revised its economic outlook upwardly.

It is not certain if the Canadian economy has expanded markedly in the first quarter as assumed by the central bank, given the view of the weaker data recorded in the US. But the second quarter outlook is quite certainly positive, added Commerzbank.

The marked recovery in the situation of the US, along with the recent decline of CAD and increase in oil price are expected to provide certain optimism to the Canadian central bank. Hence it is unlikely that the BoC will significantly change its outlook for inflation and economic growth. The USD/CAD will receive most of the momentum from the US Fed, noted Commerzbank.