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22 Jan 2015
BoC concerned on oil prices - BBH
FXStreet (Guatemala) - Analysts at Brown Brothers Harriman explained that the Bank of Canada continued the parade of central bank surprises with a 25 bp rate cut yesterday. Policy has been on hold since September 2010.
"The Canadian dollar which sold off (-1.4%) on Tuesday in response to poor data took another leg down in response to the surprise rate cut (-1.8%). It was the single biggest decline in the Canadian dollar in three years."
"Governor Poloz framed it in terms of insurance policy given the downside risks to growth and inflation. This means that it need not be the start of an easing cycle."
"This year's GDP forecast was cut by 0.3% to 2.1%, which is still respectable relative to most other high income countries. The 2016 growth forecast was lifted by 0.1% to 2.4%. Headline inflation forecasts trimmed, but the core is expected to remain mostly steady after some softness here in Q1. Still, Poloz made it clear that more insurance may be needed if oil prices continue to decline."
"The Canadian dollar which sold off (-1.4%) on Tuesday in response to poor data took another leg down in response to the surprise rate cut (-1.8%). It was the single biggest decline in the Canadian dollar in three years."
"Governor Poloz framed it in terms of insurance policy given the downside risks to growth and inflation. This means that it need not be the start of an easing cycle."
"This year's GDP forecast was cut by 0.3% to 2.1%, which is still respectable relative to most other high income countries. The 2016 growth forecast was lifted by 0.1% to 2.4%. Headline inflation forecasts trimmed, but the core is expected to remain mostly steady after some softness here in Q1. Still, Poloz made it clear that more insurance may be needed if oil prices continue to decline."