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BoC preview: See rates on hold - BAML

FXStreet (Delhi) – Research Team at BAML, expect that the Bank of Canada will likely hold rates at the October meeting even though near-term growth has been solid after a 1H contraction, but ample slack and persistent headwinds will prevent the BoC from adopting any hawkishness.

Key Quotes

“The October meeting includes the release of the MPR, where we see the BoC upgrading 3Q 2015 GDP growth to around 3% from 1.5%. But despite better near-term growth, we don’t expect a notable shift in the tone of the BoC’s policy statement, MPR or press conference, given continued economic headwinds:

- The WTI oil price is US$47/bbl as this goes to print, US$13/bbl below the July MPR expectation of US$60/bbl.

- Global growth has been tepid, weighing on broader commodity prices.

- Near-term US GDP data have been weak, with 3Q GDP growth now tracking 1.3% annualized.

Thus, the BoC’s policy statement will likely be a balancing act: squaring up near-term positive data and expectations for improvement, with global uncertainty and signs of ample slack. The BoC will likely continue to emphasize the “complex adjustment” that the Canadian economy faces, resulting in an uncertain outlook ahead.”

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