Bank of Canada likely to keep interest rate on hold in January

The Bank of Canada is set to meet tomorrow for its interest rate decision. According to a TD Economics research report, the Bank of Canada is expected to keep the interest rates unchanged at 1.75 percent tomorrow where the policy statement and MPR will be monitored for signs of a pivot away from Bank’s cautious optimism on the outlook.

In spite of the recent deterioration in GDP tracking, optimistic business sentiment and a stabilization in the labor market give the BoC some leeway to keep its recent messaging and keep GDP forecasts the same. Moreover, global trade tensions have ebbed since October, which might lead to a hawkish tone.

“While we can acknowledge that the global backdrop has improved from the October MPR, we remain skeptical that the Bank will be able to withstand much more of a deterioration in domestic conditions and continue to look for a 25bp cut in April”, added TD Economics.