FSR unlikely to have much impact on BoC monetary policy

The Bank of Canada's biggest worries about financial stability were outlined in this morning's semi-annual Financial System Review. The concerns were broadly similar to what was published in December, but the overall risk to financial stability in Canada is slightly higher.

"The Bank of Canada believes that risks to financial stability are slightly higher than in December, with worries about household vulnerabilities increasing modestly. Overall, the FSR shouldn't have much impact on monetary policy. We continue to look for the BoC to stay on hold well into 2016." said BMO Capital Markets

Governor Poloz in a press conference noted that the recent trade data have been disappointing, though some of the negative impact from weather may have persisted into Q2. Asked about the potential negative impact of higher bond yields and whether the Bank might try to offset them through a rate cut, Poloz highlighted the accompanying increase in oil prices and that there are a number of other factors that they take into account for policy as well.