2 Mar 2016
BoC likely to be disappointed again – Westpac
Research Team at Westpac, notes that the Bank of Canada cut the overnight rate from 1% to 0.75% in Jan 2015 then spent some months insisting that one was enough.
Key Quotes
“They of course then cut again in July 2015. At this point, crude oil prices were around $55/bbl and the BoC projected growth to pick up soon after, accelerating to above potential in Q4 15.
As it turned out, GDP grew 0.5% y/y in Q4, by which point oil prices had slid to $35. In its Jan 2016 statement, the BoC described renewed oil price weakness as a “setback” for Canada’s economy but still predicted growth would pick up to above potential in Q2 2016. We believe they will again be disappointed.”
Key Quotes
“They of course then cut again in July 2015. At this point, crude oil prices were around $55/bbl and the BoC projected growth to pick up soon after, accelerating to above potential in Q4 15.
As it turned out, GDP grew 0.5% y/y in Q4, by which point oil prices had slid to $35. In its Jan 2016 statement, the BoC described renewed oil price weakness as a “setback” for Canada’s economy but still predicted growth would pick up to above potential in Q2 2016. We believe they will again be disappointed.”