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20 Apr 2015
No longer expecting the Bank of Canada to cut its policy rate - Nomura
FXStreet (Bali) - Nomura's North America Economist Charles St-Arnaud notes that inflation in Canada pushed higher last Friday by a rebound in gasoline prices and impact of a weaker currency, adding that he We no longer expects the Bank of Canada to cut its policy rate.
Key Quotes
"Overall, the report shows that inflationary pressures are building. However, based on the details, it seems that this could be owing to the weaker Canadian dollar rather than a reduction in excess capacity. As such, inflation in the service sector remained unchanged on the month."
"Moreover, about 0.2pp of the m-o-m change in core inflation was owing to an increase in the price of motor vehicles, the strongest since November 2011. This strong increase may be linked to the weaker currency."
"We no longer expect the Bank of Canada to cut its policy rate and today’s inflation number provides further support to that view. However, we believe inflation is unlikely to be the primary focus of the Bank of Canada (BoC) in the coming months, as it remains concerned about the negative impact on the economy from the drop in oil prices."
"As such, indicators on the strength of the non-energy sector, especially exports, or signs of contagion to regions or industries not related to oil are more important."
Key Quotes
"Overall, the report shows that inflationary pressures are building. However, based on the details, it seems that this could be owing to the weaker Canadian dollar rather than a reduction in excess capacity. As such, inflation in the service sector remained unchanged on the month."
"Moreover, about 0.2pp of the m-o-m change in core inflation was owing to an increase in the price of motor vehicles, the strongest since November 2011. This strong increase may be linked to the weaker currency."
"We no longer expect the Bank of Canada to cut its policy rate and today’s inflation number provides further support to that view. However, we believe inflation is unlikely to be the primary focus of the Bank of Canada (BoC) in the coming months, as it remains concerned about the negative impact on the economy from the drop in oil prices."
"As such, indicators on the strength of the non-energy sector, especially exports, or signs of contagion to regions or industries not related to oil are more important."