TORONTO, Jan 28 (Reuters) – The Bank of Canada on Wednesday held its policy rate at 2.25%, as widely expected, and Governor Tiff Macklem said the high level of uncertainty made it difficult to predict when and how rates might next change.
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DOUG PORTER, CHIEF ECONOMIST AT BMO CAPITAL MARKETS
“The Bank of Canada did not change their view on neutral interest rates or the output gap. So even with the GDP revisions we saw last year and the changes in immigration, they have not fundamentally changed their view on where potential growth is, which is somewhat important. I would say their economic forecast for this year is a bit on the cautious side of the consensus—not terribly different, but a bit on the cautious side. I find their wording to be that they see risk. So they seem comfortable with where the rates are right now, so they see a wide range of outcomes that the economy could see this year, and one of those would likely entail a lower interest rates.”
ANDREW KELVIN, HEAD OF CANADIAN AND GLOBAL RATES STRATEGY AT TD SECURITIES
“They put an incrementally larger amount of emphasis on the uncertainty due to the trade dispute with the United States, perhaps reflecting the proximity to the upcoming review of the Canada-US-Mexico agreement. It may also have something to do with recent comments from the US administration around the potential for higher tariffs on Canada, should Canada pursue a free trade deal with China.”
“By playing up the uncertainty, what that allows them to do is keep expectations around the future Bank of Canada path anchored around current levels. Which means that if they do need to take a dove attack in the future, it won’t be a jarring surprise for the market.”
(Reporting by Divya Rajagopal and Nivedita Balu; Editing by Caroline Stauffer )
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