BoC likely to keep rates unchanged at next week's meeting: Commerzbank

Quotes from Commerzbank Corporates & Markets:

-Despite solid and more broad-based growth in recent quarters, the Bank of Canada lowered its key interest rate by 25 basis points to 0.75% in January, referring to the collapse in oil prices which it believes will dampen growth and inflation on balance.

-The bank said the rate cut provides an insurance against the higher risks for inflation and the financial system as a result of the oil price shock. After all, income and wealth losses could tighten the financial situation of highly indebted private households and have an additional dampening effect on domestic demand.

-Until Governor Poloz delivered his speech last Tuesday, most market players and analysts had been looking for another BoC rate cut next week. But this no longer appears to be as certain. Poloz said the rate cut in January had allowed the BoC to buy time to wait for the impact of the halving of oil prices to materialise.

-The positive impetus from higher US demand or a weaker CAD, in particular, would take a while to show their effect. This argues for the BoC to remain side-lined for now, especially with the oil price recovering a bit since early February - unlike the CAD. We envisage a stable interest rate of 0.75% next week.