Bank of Canada keeps rates unchanged, to hike in July - ING

Today the Bank of Canada, as expected, left interest rate unchanged at 1.25%. Healthy growth and 2% inflation means policy will be quickly tightened once NAFTA uncertainty clears, affirms James Knightley, Senior Economist at ING. They see two more hikes during the second half of the year. 

Key Quotes: 

“The Bank of Canada met expectations in today’s meeting, keeping the overnight interest rate unchanged at 1.25%. This was always likely given trade uncertainties relating to NAFTA and US-tariffs. Unsurprisingly NAFTA was not directly commented on by the BoC, who will not be wanting to infer anything about current negotiations, given a deal could be in the making in upcoming weeks.”

“The Canadian economy is performing well despite a recent slowdown in growth. This economic moderation was expected after 2017’s exceptionally strong performance and has been largely down to the trade uncertainties, measures taken to cool down local housing markets and rising interest rates.”

“The latest headline CPI reading came in at 2.2% year-on-year in February, the fastest pace in three years, with core inflation climbing slightly above the Bank’s 2% target. These figures are likely to challenge the Bank’s recent dovish ‘wait-and-see’ approach.”