Highlights of the Bank of Canada statement
- Bank of Canada interest rate decision 1.00% vs 0.75% prior
- Prior overnight rate was 0.75%
- Economists narrowly expected a hold at 0.75%
- Future monetary policy decisions not predetermined
- Sees widespread strength in business investment and exports
- Recent economic data have been stronger than expected
- Consumer spending remains robust
- BOC continues to expect a moderation in the pace of economic growth in the second half of 2017
- Wage and price pressures are still more subdued than historical relationships would suggest, as observed in some other advanced economies
The guidance certainly doesn't close the door on another hike. I'd classify it as neutral but most of those who thought the BOC might hike today believed it would come with a more-dovish, or at least patient statement.
Instead, they said this:
"Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation. Particular focus will be given to the evolution of the economy's potential, and to labour market conditions. Furthermore, given elevated household indebtedness, close attention will be paid to the sensitivity of the economy to higher interest rates."
So we'll be watching jobs market data and for any signs of a kink. The comment on potential growth is interesting. There is a thesis at the BOC that global dynamics (esp disinflation) have pushed higher the ability of the economy to grow without creating inflation. Expect to hear more about that in the months ahead.
The Canadian dollar has soared on the announcement.
Note that there is not BOC press conference today, just the statement.
