The mast monetary policy decision was publicised on the 24th of April when the Bank of Canada decided to keep the OCR at 1.75%
Back then the BOC attributed the slump in global economic activity to the same deadlock in international trade relations. It was maintained, however, that the overall projections of the bank point to a confident picking up in global growth.
“In Canada, growth during the first half of 2019 is now expected to be slower than was anticipated in January. Last year’s oil price decline and ongoing transportation constraints have curbed investment and exports in the energy sector” [source]
At the time of that last monetary decision the crude oil was trading at $65 per barrel, and since then the price has steadily tumbled down to $58 per barrel. Undoubtedly, that is going to be a significant point of consideration for the BOC, as oil prices now look set to test the strength of the fundamentally important level of $55 per barrel, and if they break below that level, the Canadian investor confidence is going to be severely impaired.
On the other hand, the year to date has measured a significant improvement in Canadian inflation, as the BOC has managed to reach its 2% target rate, and the pressing question now is how the bank can make its overall monetary policy more accommodative of sustainable customer confidence and therefore maintain the inflation rate as it is.
Image source: TradingEconomics.com
As for unemployment, the Canadian labour market remains exposed to global trade woes and other macroeconomic factors, which leaves more to be desired from the local jobs market. The unemployment rate fell with 0.1% to 5.7% in April, and the BOC is still struggling to improve the underlying conditions and make the economy more supportive of sustained employment growth rate.
Overall, the bank is expected to keep the interest rate unchanged at 1.75%; however, it remains to be seen how the board of directors views the recent changes in the US-China trade relations, which became more uptight and fragile since the last policy decision was made. Moreover, the highlight of the report should be the bank's commentary on the falling oil prices and whether it is weighing in on possibly lowering the interest rate in order to limit the damaging effect of the falling oil prices, and the detrimental impact it is having on investor confidence.
Image source: Trendsharks ©, created with TradingView.com
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