BoC: A more upbeat message – NBF

Analysts at National Bank Financial (NBF) note that the Bank of Canada left (Boc) the overnight rate unchanged at 1.75% yesterday.

• "While the central bank says ongoing trade conflicts and related uncertainty “remain the biggest source of risk to the outlook”, it was encouraged by “nascent evidence that the global economy is stabilizing”.
• Statement from the Bank of Canada was arguably more upbeat than the message put out last October. Upward revisions to Canadian GDP were not directly mentioned by the central bank, although emphasis on “resilience” of the economy suggests the BoC is now more comfortable about the Canadian outlook. As such, unlike in October, the option of rate cuts was probably not on the table at this meeting.
• In addition to being forced to raise its 2019 GDP growth forecast for Canada (because of the better-than-expected handoff from 2018Q4), the central bank may also have to upgrade the 2020 outlook as it incorporates fiscal policy in January’s Monetary Policy Report. Of course, that assumes the global economic outlook does not deteriorate from here e.g. trade tensions intensify. All told, we remain comfortable with our forecast of a steady overnight rate over the near to medium term.”