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Main Indicator: BOC Interest Rate Statement
Most Recent Release
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Actual | Forecast | Previous | Revised Form | |
| 3.0% | 3.0% | 3.0% | N/A | ||
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Provided by: Bank of Canada
The Canadian Dollar reached parity against the US Dollar prior to its meeting. In its statement, part of which is reporduced below, the bank said it judges that its current level of 3% is "appropriate." Consumer inflation will continue to have upside risks as commodity prices continue to increase, but core inflation should remain "broadly in line with expectations." From the Release: "Three major developments are affecting the Canadian economy: the protracted weakness in the U.S. economy; ongoing turbulence in global financial markets; and sharp increases in many commodity prices. The first two developments are evolving roughly in line with expectations in the April Monetary Policy Report. However, commodity prices are continuing to outstrip earlier expectations. This has led to further increases in Canada's terms of trade and real national income, and has altered the outlook for global and domestic inflation. Total CPI inflation over the next year is expected to be much higher than projected at the time of the April Report. Assuming energy prices follow current futures prices over the projection period, total CPI inflation is projected to rise temporarily above 4 per cent, peaking in the first quarter of 2009. As energy prices stabilize and with medium-term inflation expectations remaining well anchored, total inflation is then projected to converge to the core rate of inflation at the 2 per cent target in the second half of 2009. Core inflation is projected to remain well contained and broadly in line with earlier expectations, averaging close to 1.5 per cent through the third quarter of this year and then rising to 2 per cent in the second half of 2009. The three major developments affecting the Canadian economy pose significant upside and downside risks to the Bank's base-case projection. Weighing the implications of these, the Bank views the risks to its base-case projection for inflation as balanced. Against this backdrop, the Bank judges that the current level of the target for the overnight rate remains appropriate." |
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Table of Past Data
| 4/24 | 5/29 | 7/10 | 9/5 | 10/16 | 12/4 | 1/22 | 3/4 | 4/22 | 7/15 | ||
| Actual | 4.25% | 4.25% | 4.50% | 4.5% | 4.50% | 4.25% | 4.00% | 3.50% | 3.00% | 3.0% | |
| Forecast | 4.25% | 4.25% | 4.50% | 4.5% | 4.50% | 4.5% | 4.00% | 3.75% | 3.00% | 3.0% | |
| Previous | 4.25% | 4.25% | 4.25% | 4.5% | 4.50% | 4.5% | 4.25% | 4.00% | 3.50% | 3.0% | |
| Revised From | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
Past Releases
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Actual | Forecast | Previous | Revised Form | |
| 3.00% | 3.00% | 3.50% | N/A | ||
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Provided by the Bank of Canada
The Bank of Canada cut rates by 50 basis points as the drag in the US economy has consequences on the Canadian economy. Exports are expected to decline, and tight credit conditions will moderate business investment and consumer spending. From the Release: "Growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity. The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy... The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010.... In line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada."
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Actual | Forecast | Previous | Revised Form | |
| 3.50% | 3.75% | 4.00% | N/A | ||
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Provided by the Bank of Canada
The Bank of Canada decided to cut rates 50 bps in reaction to the weak GDP growth in Q4 of 2007. For Canada, the rise in commodity prices have been beneficial to the income. However, with an appreciated Canadian Dollar and a further deepening of US slowdown, exports will be expected to decline. As inflation risks headed toward the downside, the bank announced that 1/2 percent cut was warranted to stimulate aggregate supply and demand, while maintaining inflation around the 2.0% target. |
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Actual | Forecast | Previous | Revised Form | |
| 4.00% | 4.00% | 4.25% | N/A | ||
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Press Release from the Bank of Canada
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Actual | Forecast | Previous | Revised Form | |
| 4.25% | 4.5% | 4.5% | N/A | ||
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Bank of Canada Cuts Rates, CAD Falls. Bank of Canada Statement The Bank of Canada lowered interest rates to 4.25% from 4.5% as their dovish statement citing concerns about the outlook for the US economy and global demand. The Bank of Canada noted that inflation was down compared to their prospects in their October Monetary Policy Report (MPR). Total inflation, at 2.4%, and core at 1.8% in October were below their expectations, “reflecting in large part underlying strength in domestic demand.” The bank now “expects inflation to be lower over the next several months”. Though the economy is operating above its production capacity, the bank notes the downside risks to inflation have increased since their report. Difficulties in financial markets related to “the valuation of structured products and anticipated losses on US sub-prime mortgages have worsened since mid-October.” This has caused the price of credit to increase across the globe, which can hamper demand for Canadian exports as the outlook for the US economy and the US housing sector, “are expected to persist for a longer period of time”. The bank leans towards the downside risks, and lowered interest rates. If inflation is in fact receding, then the bank has room to cut rates further if it feels growth is going to be hampered as global growth slows. The bank also mentioned that “in the context of exceptional volatility in global financial markets, the Canadian Dollar spiked well above parity with US Dollar in November, but has recently traded to the 98 cent US level assumed in the October MPR”. The pair broke above 1.01 directly after the bank’s decision. 
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Actual | Forecast | Previous | Revised Form | |
| 4.50% | 4.50% | 4.50% | N/A | ||
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The Bank of Canada's held rates steady. On the upside risk to inflation, the Bank reported that the Canadian economy is "operating above its potential," as strong domestic demand, a robust global economic expansion and strong commodity prices are fueling growth. On the downside, "the outlook for the US economy has weakened because of greater-than-expected slowing in the housing sector," and "credit costs for firms and households relative to the overnight rate will be 25 basis points higher over the projection period that it was prior to the summer developments." About the appreciation versus the US dollar, the Bank said that "the combined effect of a weaker U.S. outlook and a higher assumed level of the Canadian dollar implies, that net exports will exert a more significant drag on the economy in 2008 and 2009 than previously expected." The bank ended their statement with this, "all factors considered, the Bank judges that the risks to its inflation projection are roughly balanced, with perhaps a slight tilt to the downside." In this chart of the USD/CAD, you can see that the pair gained in the Loonie's favor post release, but it was due more to poor TICS data out of the US. 
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Actual | Forecast | Previous | Revised Form | |
| 4.5% | 4.5% | 4.5% | N/A | ||
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The Bank of Canada holds rates steady at 4.5%, citing both upside and downside risks to inflation.
Central Banks this week are deciding on rates in a backdrop of August’s recent turmoil in global financial markets, due to subprime mortgage rates in US. Not only did the price of credit increase forcing central banks around the world to inject money into the markets, but there are fears that the US housing sector can cause the rest of the US economy, the world’s largest, to slow down. If growth in the US slows, the rest of the globe, and especially Canada may be afflicted. The Press Release following the Bank’s decision stated that the Canadian economy and inflation is running strong, but that developments in the US will have to be monitored as the bank judges that “it now seems likely that the adjustment in the U.S. residential housing sector will be more pronounced and protracted, exacerbated by recent developments in financial markets.” The downside to inflation is that Canadian exports will be hurt by weaker demand from the US if the housing adjustment spills over into the broader US economy. CPI inflation in July, at 2.2% total and 2.3% core, continue to be above the inflation target of the Bank, though in line with its expectations. The Canadian dollar has also largely traded in line with the Bank’s July Monetary Policy Report. The pace of economic growth in the first half of this year was above expectations and presents the upside risk to inflation. According to the release, “The strong growth has been led by domestic demand, as Canada is enjoying a strong labor market and higher than expected increases in home sales and prices. Recent developments however have led to some tightening of credit conditions for Canadian borrowers, which should temper growth in domestic demand.” “The Bank will continue to closely monitor evolving economic and financial developments.” The Bank of Canada meets next on October 16th, while a full update of the Bank’s outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on October 18th. |
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Actual | Forecast | Previous | Revised Form | |
| 4.50% | 4.50% | 4.25% | N/A | ||
| Last week's economic releases suggest a rate hike may be called for. The BoC referred to heightened inflation pressure compared to its April Monetary Policy Report (MPR). Domestic demand, has been strong and growing while inflation is above the 2.0% target, and projected growth is 2.5% in 2007, higher than previously thought. Commodity prices were also firm. On the downside to inflation risk are the US housing sector correction and the strength of the Canadian dollar, alongside with the interest increase. The BoC feel these risks are well balanced and expects another rate hike to curb inflation back to target and balance aggregate demand with supply by 2009. | |||||
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Actual | Forecast | Previous | Revised Form | |
| 4.25% | 4.25% | 4.25% | N/A | ||
| Bank of Canada held rates as expected and mentioned slightly hawkishly, "On balance, the Bank judges that there is an increased risk that future inflation will persist above the 2% inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to target." | |||||
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Actual | Forecast | Previous | Revised Form | |
| 4.25% | 4.25% | 4.25% | N/A | ||
| "This is BoC's the 7th consecutive decision to hold rates while lowering growth forecast to 2.2% for 2007. Policy makers increased their second-half forecast for inflation to above 2% from 1.7% in January and said it would return to 2% by mid- 2008. “The Bank continues to judge that the risks to its inflation projection are roughly balanced,” the BOC said, similar to its earlier statements. “There is now a slight tilt to the upside,” the BOC added, however." | |||||