Bank of Canada kept its overnight rate steady at 0.5 percent on balanced inflation risks, against the market expectation of a 25bp cut. The BoC is likely to keep it unchanged during the first half of this year, with risks pointing towards further easing. The central bank lowered its growth forecast as declining commodity prices continue to weigh on the economic activities.
Inflation is getting support from the depreciation of the Loonie, further compensating disinflationary pressures from declining energy prices and economic slack. Inflation is unlikely to reach the central bank's target as commodity prices continue to decline, with further slowdown in the growth of global economies.
Markets await November's monthly GDP which is scheduled on Friday to provide fresh cues for the Loonie.