BoC meeting strengthens April rate cut call – RBC CM

On Wednesday, the Bank of Canada decided, as expected, to keep the overnight interest rate unchanged at 1.75%. Josh Nye, Senior Economist at RBC Economics, argues the decision reinforces their call of a rate cut in April. 

Key Quotes: 

“After a neutral speech from Governor Poloz just two weeks ago, the Bank of Canada sounded decidedly more dovish in today's policy statement. Economic data over the last three months were described as "mixed" but the bank's characterization was rather downbeat, noting signs of weaker exports, business investment, job creation, and consumer confidence and spending.”

“While some of the slowdown in GDP growth in late-2019 was attributed to temporary factors, the BoC is also concerned that Canada's economy is being more negatively impacted by global headwinds than previously thought.”

“With the economy no longer seen as operating close to full capacity, the bank's tolerance for sub-trend growth is likely to be limited. Today's statement makes us more comfortable with our call for a rate cut in April, and market odds of a move by mid-year are now slightly above 50%.”