ForexLive has a couple of previews posted already for the BoC on Wednesday 18 April 2018 (announcement due at 1400GMT)

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RBC:

  • We see the BoC keeping the overnight rate steady at 1.25% at Wednesday's meeting. There are certainly some similarities to the last MPR, with growth coming in below BoC forecasts (Q1 shaping up ~1% below their 2.5% Jan MPR forecast) and underlying inflation rising (average of the three core measures at 2.0% in Feb). As well, the Business Outlook Survey remained relatively upbeat on April 9th. However, US growth should not see the upgrade included in January following the passing of the US tax plan.
  • In this context, we think the BoC will opt for a "hawkish hold" as opposed to the "dovish hike" in January, with market pricing ~50% for a move in May (our forecast).
  • The April MPR will have an updated look at potential growth (last estimated at 1.6%) and the neutral rate (last at 2.5-3.5%), with implications for the degree of excess capacity and relative distance from neutral of the overnight rate.

TD:

  • We are with a broad consensus for the BoC to leave rates unchanged.
  • The tone of the communications should be strategically balanced in order to keep the rates curve priced for gradual hikes, but continued cautious messaging along with downward growth revisions and a likely upward revision to potential output should be dovish at the margin for markets.

BMO:

The Bank of Canada is widely expected to hold rates steady at 1.25% at the April 18th policy meeting. A combination of soft economic data and persistent uncertainties clouding the outlook has kept the Bank cautious, and there's no reason to expect much deviation at this meeting.

  • The Canadian economy has cooled since posting a solid run of growth from mid-2016 to mid-2017. Since then, GDP growth has clocked in at about 1.5%, hardly a reason to get more aggressive with policy. First quarter growth looks to come in at a similar pace, which would be 1 ppt below the BoC's January forecast.

The bigger drivers of the BoC's caution are the various uncertainties clouding the outlook.

  • Housing is in the spotlight at the moment with home sales down about 13% in Q1 due to the new mortgage rules and tighter foreign-buyer restrictions in B.C. The real test for housing will come in April/May/June, the spring buying season, as that's when most activity occurs. Accordingly, the BoC will likely remain cautious until there are clear signs that housing is at least stabilizing.
  • The other major areas of uncertainty are trade/NAFTA and household debt. On NAFTA, the tone has turned more upbeat, but that changes little for the BoC as there's nothing definitive, providing no reason to dial back the downward bias put into their forecast over the past couple of quarters.
  • And, the recent threat of a U.S.- China trade war reinforces the idea that caution on the trade front is very much warranted. With respect to household debt burdens, there's been nothing new on this front.
  • Debt ratios remain elevated, but there are no signs that prior rate hikes have hit households particularly hard. Rather, they are acting as a modest headwind on spending (as one would expect).

The Monetary Policy Report, released with the policy statement, is expected to show a downgraded forecast for Q1 GDP growth (as outlined above) to around 1.5%.

  • The BoC's call for Q2 will be particularly interesting, as we'll get some clarity on whether policymakers think this growth slump is temporary and could also shed some light on the expectations for the housing market.
  • On inflation, the Q1 forecast will be revised up markedly (to around 2.1% from 1.7%), though projections further out may only see small changes, if any. Recall that the BoC no longer forecasts core CPI.
  • We'll also be watching closely for any new thoughts on the slack in the labour market. BMO's estimate of the BoC's Labour Market Indicator showed some tightening of conditions in March, but slack remains.

Diminishing labour market slack, GDP near potential and core CPI trending higher, will keep the Bank from being overly dovish and should maintain the narrative of slow but steady rate hikes.

The April MPR also brings a re-evaluation of potential growth and the neutral policy rate. The BoC has the middle of the range for potential growth for 2018 and 2019 at 1.4% and 1.5%, respectively. While we're not particularly upbeat on longterm potential growth given demographics and historically poor productivity, the near-term outlook could be a bit higher due to very strong immigration lifting population growth. Watch for any changes to the neutral policy rate on the back of any potential growth moves. Notably, the BoC's 2.5%-to-3.5% neutral range they estimated in April 2017 seems relatively high compared to the Fed's long-range median dots of 2.88%. We wouldn't be surprised to see the BoC's range come down 25 bps.