With regards to the BoC meeting, “the biggest surprise in the MPR was the sharp cut to the growth outlook,” according to Benjamin Reitzes, Canadian Rates & Macro Strategist at BMO. “Even after the surprisingly strong January GDP report, the BoC cut its Q1 GDP growth forecast half a point to 0.3% (worse than even our below-consensus 0.7% call). And, Q2 was introduced at 1.3%, a full percentage point below our call.” The strategist concluded that “it’s going to take an exceptionally weak string of data to underperform, suggesting the bar to cut rates is quite high.” Irene Lauro, Economist at Shroders agrees, noting that “the BoC removed its hiking bias by eliminating the reference to the need for interest rates to return to a neutral range”. However, the economist also noted that “the bank believes that the slowdown of growth to a below-potential pace will prove to be temporary, as the BoC left growth expectations for 2020 untouched at 2.1%, which is above the BoC’s estimate of potential growth of 1.8%.”
“The repo rate forecast was lowered for the entire forecast period,” commented Johan Löf, Senior Economist at Handelsbanken Capital Markets about Riksbanken’s policy rates. “The Riksbank now sees an average repo rate of 0.04% in the second quarter of 2020, compared to its previous forecast for a repo rate of 0.23%,” he added. “The Riksbank now sees it as unlikely that the repo rate will be raised this autumn,” concluded the senior economist.