CAD: BoC to keep rates despite energy shock – Rabobank

Rabobank's Senior Macro Strategist Bas van Geffen expects the Bank of Canada (BoC) to keep its overnight rate at 2.25% through year-end. He notes inflation had been near target before an energy-driven spike revived upside risks, but growth remains volatile and productivity weak. Geffen believes policymakers will look through the external shock and maintain a steady stance given the soft domestic outlook.

External inflation seen as transitory for BoC

"The US and Canadian central banks set policy today."

"Starting, chronologically, with the Bank of Canada, we continue to expect a steady overnight policy rate at 2.25% through year end."

"Inflation had been stabilizing near target until a sharp, energy driven surge revived upside risks, while economic growth remains volatile and productivity weak."

"So, we expect the Bank to look through the externally-driven inflation shock and we see policy on hold given the soft economic outlook."

"Likewise, we see the FOMC leave US monetary policy unchanged."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)