Poloz says rate cut buys time to see how economy responds
- January rate cut buys the central bank some time to see how economy responds to effects of oil shock
- January rate cut gives greater confidence of reaching full capacity and stable inflation by the end of 2016
- "We are in an uncertain setting"
- Oil price shock will worse debt-to-income ratio of Canadians, thereby boosting financial stability risks
The market was pricing in as much as an 85% chance of a Bank of Canada cut on March 4. The first comment from Poloz absolutely sounds like they don't intend to cut right away.
USD/CAD dropped to 1.2520 from 1.2616. I think it could fall further from here but the better trade might be in a cross like CAD/JPY, which is tracing out an intraday reversal.
