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The Bank of Canada is expected to keep policy rates unchanged at its monetary policy meeting that is scheduled to take place on July 13, following depressing market movements post UK’s exit from the European Union.
Canada is a major exporter of oil and the continuous pace of low crude prices is likely to weigh on the pending decision of the country’s central bank. Further, risks emerging from Brexit are posing serious threats to global economic growth.
Over 40 economists polled this week by Reuters, forecast the BoC would hold rates at 0.5 percent at its July 13 meeting. Rates are expected to rise in late 2017 and reach 1.00 percent by mid-2018, according to the poll. Primary bond dealers, however, are less optimistic and predict a rate hike only in early 2018, according to a Reuters survey last week.
"Brexit could lead to slower world growth including in the US which would hurt Canada's exports, which the BoC sees as the key to growth," Reuters reported, citing James Blumenthal, chief Canada Market Analyst, Informa Global Markets.
However, a few economists predicted a 25 basis point cut as the BoC’s next policy move, having a median probability of only 30 percent. Meanwhile, another rate cut by the central bank is likely to fuel the debt burden of Canadian households. The ratio of household credit market debt to income remained 165.3 percent in the first quarter.
