22 Jan 2015
BoC: There could be further cuts coming - Scotia Bank
FXStreet (Bali) - According to Scotia Bank Global Economics Team, to the extent that oil prices remain low, there could be further BoC cuts coming.
Key Quotes
"The Bank of Canada’s statement is coy on the matter, with the statement only saying that "The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response." What will be the extent of that monetary policy response?
As previously mentioned, markets have moved to pricing in decent odds of a further cut. There’s a good case to be made that the Bank could get back to the lower zero bound given the extent to which markets have grown accustomed to such pricing globally and the nowlower risks of entering into interest rate levels which were, at least in 2008-09 when the BoC last went there, relatively untested waters.
Other central banks have moved to indeed negative rates outright since then. In terms of the fundamentals, the BoC’s projections so a greater macroeconomic impact of the decline in oil prices on the economy in 2016 than in 2015, so to the extent that oil prices remain low, there could be further cuts coming.
Key Quotes
"The Bank of Canada’s statement is coy on the matter, with the statement only saying that "The negative impact of lower oil prices will gradually be mitigated by a stronger U.S. economy, a weaker Canadian dollar, and the Bank’s monetary policy response." What will be the extent of that monetary policy response?
As previously mentioned, markets have moved to pricing in decent odds of a further cut. There’s a good case to be made that the Bank could get back to the lower zero bound given the extent to which markets have grown accustomed to such pricing globally and the nowlower risks of entering into interest rate levels which were, at least in 2008-09 when the BoC last went there, relatively untested waters.
Other central banks have moved to indeed negative rates outright since then. In terms of the fundamentals, the BoC’s projections so a greater macroeconomic impact of the decline in oil prices on the economy in 2016 than in 2015, so to the extent that oil prices remain low, there could be further cuts coming.