| Followers | 681 |
| Posts | 141613 |
| Boards Moderated | 35 |
| Alias Born | 03/10/2004 |
Thursday, September 08, 2011 1:40:27 PM
BoC Remains On The Sidelines
* Thursday, September 8, 2011
The Bank of Canada (BoC) kept policy rates unchanged, in line with expectations.
Canadian economic growth is sub-par due mainly to the effect of the strong currency on net exports. Meanwhile, core inflation is below target. Growth and inflation are both facing the same temporary factors that have plagued the U.S. (Japan supply disruptions, new vehicle price drops, high gasoline prices, and weather and wildfires in Alberta). Domestic demand is holding up well, with business investment looking particularly strong. However, sluggish U.S. growth and weak equity market performance have led to the fourth consecutive monthly drop in Canadian consumer confidence. Yesterday’s BoC policy announcement was more dovish than last month. This was as expected because Bank of Canada Governor Mark Carney’s parliamentary speech already signaled a downgrade to the Bank’s growth outlook (which was 2.9% for 2011 and 2.6% for 2012). We think the chance of a rate cut at the next meeting is low given our base case view for slow U.S. growth. Real rates are already negative. The BoC will remain neutral for a few months in order to assess the state of the economy. Canadian household indebtedness remains a concern, but house prices appear to be holding up without overheating (except in Vancouver). Bottom line: The BoC will be cautious about hiking rates until green shoots develop in the U.S. Move to neutral weight within a global fixed income hedged portfolio to take advantage of rolldown in Canada.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110908.GIF
George.
Click on "In reply to", for Authors past commentaries.
* Thursday, September 8, 2011
The Bank of Canada (BoC) kept policy rates unchanged, in line with expectations.
Canadian economic growth is sub-par due mainly to the effect of the strong currency on net exports. Meanwhile, core inflation is below target. Growth and inflation are both facing the same temporary factors that have plagued the U.S. (Japan supply disruptions, new vehicle price drops, high gasoline prices, and weather and wildfires in Alberta). Domestic demand is holding up well, with business investment looking particularly strong. However, sluggish U.S. growth and weak equity market performance have led to the fourth consecutive monthly drop in Canadian consumer confidence. Yesterday’s BoC policy announcement was more dovish than last month. This was as expected because Bank of Canada Governor Mark Carney’s parliamentary speech already signaled a downgrade to the Bank’s growth outlook (which was 2.9% for 2011 and 2.6% for 2012). We think the chance of a rate cut at the next meeting is low given our base case view for slow U.S. growth. Real rates are already negative. The BoC will remain neutral for a few months in order to assess the state of the economy. Canadian household indebtedness remains a concern, but house prices appear to be holding up without overheating (except in Vancouver). Bottom line: The BoC will be cautious about hiking rates until green shoots develop in the U.S. Move to neutral weight within a global fixed income hedged portfolio to take advantage of rolldown in Canada.
http://www.bcaresearch.com/public/story.asp?pre=PRE-20110908.GIF
George.
Click on "In reply to", for Authors past commentaries.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
