CIBC Research comments on today’s BoC policy rate decision arguing that the BoC ‘sees an economic boom in all the wrong places’.
“Its decision to stand pat on rates lies less in any real troubles on the ground than in the uncertainties that Washington politics represent for trade. Existing economic slack is melting away faster than expected, and the Bank can no longer cite weakness in hours worked, but has replaced that with a reference to soft wages, (which aren’t nearly as weak in the payrolls data), as well as continued softness in core CPI as reasons why they can afford to wait,” CIBC argues.
“Waiting for what? Mostly for clarity on trade policy stateside. The Fed is taking steps to nudge rates higher before the output gap is closed, but in Canada, look for the first hikes to come in early 2018, a delay designed to keep the C$ in check. The BoC judges that even at today’s exchange rates, there are "ongoing competitiveness challenges” for exporters,“ CIBC adds.
Source: CIBC Economics – CIBC Capital Markets
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