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BoC to be sidelined by soft data - Bloomberg

As Bloomberg notes ahead of the Bank of Canada's (BoC) Interest Rate Decision for Wednesday, the Canadian central bank is likely to find itself buried in a soft patch of economic data, which could see the BoC extending a no-move period on rates.

Key quotes

The Bank of Canada is likely to remain on hold for at least a few months as the country copes with turmoil in the oil sector and policy makers gauge the impact of volatility in financial markets. After that, views diverge.

Economists expect hikes to resume later this year -- with one or two more increases-- given the nation’s fundamentals remain strong despite recent headwinds. Markets are less sanguine, focusing more on the deteriorating global economic outlook and trade risks between the U.S. and China. Swaps trading suggests investors believe the Bank of Canada’s normalization may already have come to an end, after five hikes since the middle of 2017.

“The pendulum in the market often swings more than the underlying facts on the ground,” Avery Shenfeld, chief economist at CIBC World Markets, said by phone. “We’re still expecting a hike or two in 2019,” though “it’s going to really depend on what sort of recovery we get in oil prices and when we get it.”

All but one of 18 economists surveyed by Bloomberg expect the central bank to keep its benchmark rate at 1.75 percent in a decision at 10 a.m. in Ottawa. Markets are pricing in zero chance of an increase. 

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