The Bank of Canada left rates steady in its most recent announcement and removed any reference to future rate increases. The tilt to a more dovish tone came as the Bank downgraded their growth forecast for 2019. Anthony Okolie talks with James Marple, Senior Economist, TD Bank Group.
- As expected, the Bank of Canada held rates unchanged. James, what stood out for you today?
- Well, the statement really did meet expectations in many ways. It certainly was more dovish, especially relative to their March statement. They removed reference to interest rate increases, moving to a neutral stance. Their outlook, I think, recognized the weakness in growth that we've seen now but also maintained its optimism that growth would improve. So pretty balanced, all told, and, of course, moving to a more neutral stance, supporting our expectations that policy will remain on hold for some time.
ANTHONY OKOLIE: And the Bank of Canada also downgraded the growth outlook. What are some of the risks to the outlook going forward?
- Sure. Well, some of them captured in a downgraded economic outlook. I mean, that really captures the weakness we've seen to date, and also what we will see, I think, even through the second quarter. The risks really are we have a hugely uncertain global economic environment, policy that could go either way on some of the trade issues with the US and its trading partners, perhaps a trade deal with China, but moving to skirmishes with other countries like Europe and Japan.
Obviously pipeline issues that continue to remain uncertain and a housing market that looks like it's having a soft landing. But we still continue to see activity in some markets where there are risks. So pretty balanced in terms of the risks around a pretty cautious outlook all told.
ANTHONY OKOLIE: And did anything happen today that would make you change your forecasts going forward?
- Sure. Well, nothing really in this statement. If anything, the Bank of Canada has moved more down to our more cautious view of the economy, and I think especially over the near term. Still some optimism into 2020. And we'll really have to see how the data plays out in terms of whether that optimism is warranted. But I think, again, supporting our view, if anything, that policy will remain on hold. We don't expect to see any rate increases over the immediate future, probably not over the remainder of this year. And this statement today and the accompanying changes to their forecasts really support that view.
ANTHONY OKOLIE: And finally, where do you see the loonie going over the next little while?
- Sure. Well, pretty range-bound. I mean, you have seen an improvement in oil prices and global risk sentiment. Typically that would be positive for the Canadian dollar. But on the other hand, we have a central bank that's likely to remain on hold. We have continued uncertainty around the broader policy framework globally and some downside risks obviously to the domestic economy from still highly levered consumers. So I think, all told, that will leave the dollar pretty flat.
ANTHONY OKOLIE: James, thank you very much for your time.
- You're welcome, thanks.