Investing.com - Financial Markets Worldwide

Canada: Rate Hikes This Year? Not So Fast

ByThe National Bank of Canada
Published 05/02/2012, 05:40 AM
Updated 05/14/2017, 06:45 AM

Canada’s disappointing February GDP report threw a wrench in the Bank of Canada’s forecast for the first quarter. February’s results were so bad that, barring a miracle in March, Q1 growth will fall well short of the BoC’s latest forecast of 2.5% for the quarter. Even assuming an overly optimistic 0.5% increase in March output, Q1 GDP growth is likely to print around 2%. Just how significant is a 0.5% miss in the BoC’s Q1 forecast?

As today’s Hot Chart shows, assuming no change to the MPR projections after Q1 of 2012, the output gap doesn’t close through the projection horizon. While that in itself doesn’t rule out rate hikes, it certainly reduces the probability this year ― which explains why markets pared back their expectations right after the GDP data was released.

And there’s more than just domestic woes to contend with. The BoC made clear that “the timing and degree of any such withdrawal (of stimulus) will be weighed carefully against domestic and global economic developments.” So, the evolution of the European recession will also be crucial in determining monetary policy at home. Given our slightly more bearish view on Europe than the BoC and the apparent Q2 softening in the US, we continue to expect rate hikes to be delayed until next year, something that would take some steam out of the CAD given what’s still priced in.
Canada Rate hikes this year Not so fast

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.