Canadian coin dollar stand on Canada banknote money. Image source: wirojsid © 123RF.com
The BOC kept its overnight rate unchanged at the previous level, which was generally expected by the market and did not surprise investors that much.
In the following report, in which BOC officials explained their decision to maintain the interest rate as it is, they presented several points in regards to the economic situation in the country. Firstly, the BOC maintains that the Canadian economy has been going through a soft patch recently which is a consequence of the global trade uncertainty – the same issue of tariff-related policies that have been hampering the international exports and investments and has been pointed by multiple other central banks in their statements.
Secondly, the slump in consumer spending and the subsequent decline in housing market activity follows from last year’s hike in borrowing rates. As we have pointed out in this week’s expectations article, a key element in the BOC’s monetary policy is the inflation rate, which is currently staying at 1.9% and the bank is determined to reach and then maintain the targeted level of 2%.
Finally, the BOC states that it is expecting the negative impact of these factors to start fading out during the second quarter of the fiscal year and for that reason, it is forecasting the economic growth rate to rise to 2.1% in 2020.
After these announcements were made public, the CAD/CHF currency pair reacted to the news, and it depreciated with 0.50% in the intraday trading session. The previously outlined (in Monday’s weekly expectations) significant resistance level at 0.75954 remains strong, and the price broke below the level, following a short-lasting false-breakout above the level.
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