BOC's Macklem:
- There's volatility in data, not too worries about jump in US inflation -- it's one month
- We expect inflation to rise to around 3% on base effects
- A large part of the housing boom is fundamentally driven due to more people spending more time at home. They want more space
- Supply is having trouble keeping up with demand
- There's no question that low interest rates are part of the equation
- Our projections saw an 80-cent Canadian dollar (it's at 0.8230)
- If CAD were to continue to strengthen, particularly if it wasn't reflecting better news on the Canadian dollar, that could be a headwind
- If CAD 'moves a lot further, that could have a material impact on our outlook and it's something we would have to take account of in our policy'
There is a bit of jawboning for the loonie there and there has been some initial CAD weakness but it begs the question: What are they going to do? More QE is off the table and rates hikes are still some ways away. They could talk about delaying that but I think you would need at least 500 pips more CAD strength to even bring that into play.
