Bank of Canada holds rates unchanged, as entirely expected

Full text

Highlights from the statement:

  • Current stance of monetary policy still appropriate
  • Risks to projected path of inflation are roughly balanced

The BOC shifted away from dovish to neutral last month and that has continued.

  • Uncertainty over global risks is not diminished
  • Assumes fiscal expansion to lift US GDP by 0.5% by end of 2018
  • Sees material consequences from any US protectionism
  • Export growth will be limited by recent CAD appreciation

A bit of jawboning in there. The export forecast was cut to 0.7 p of GDP from 0.8 points.

Changes in forecasts:

  • Sees 2017 GDP at 1.3% from 1.1%
  • Sees 2018 at 2.1% from 2.0%

On growth:

  • Household spending to be main driver of growth in 2017
  • Resource sector adjustment to oil shock largely complete
  • Economy has material excess capacity; continues to see return to full capacity around mid-2018

USD/CAD ticked lower on the initial headlines to 1.3070 from 1.3080.

The Bank of Canada released the January Monetary Policy Report along with the statement. Read it here.