Bank Of Canada Monetary Policy Preview

The Bank of Canada will be holding its monetary policy meeting this week.

Given the recent patch of economic data, it is unlikely that the central bank will be pushing for rate hikes. The OIS money markets are also signaling no change to the BoC’s rates this week.

The central bank held interest rates unchanged in January at 1.75%. However, officials maintained that the bank was not done with rate hikes despite holding them steady.

The BoC Governor, in a speech recently said that higher interest rates were forcing consumers to cut back on discretionary spending. The BoC Governor stated that, since the middle of 2017, the central bank raised interest rates five times. He continued by affirming that interest rates in Canada will need to move higher.

However, at the same time, Poloz said that the timing of the rate hikes remains uncertain due to mixed messages from the global economy.

At its previous meeting, the BoC statement read:

“Meanwhile, consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments.”

Recent economic data has remained muted with consumption spending and household investment staying weak.

Here’s a quick recap of the economic data since the last BoC meeting.

Retail Sales Cap Off A Weak Year

Retail sales in Canada declined in December amid lower energy prices.

The data marked a year that saw the weakest pace of growth in retail sales in nearly a decade.

Data from Statistics Canada showed that retail sales fell 0.1% on the month in December to a seasonally adjusted 50.35 billion CAD. The markets were, however, expecting to see a 0.3% decline.

Canada Retail Sales

Canada December Retail Sales (Source: Statistics Canada)

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