Bank of Canada Preview: Forecast From 4 Major Banks

The Bank of Canada is set to leave rates unchanged at 0.25% and provide more information about its announcement to taper down its bond buys at 14:00 GMT. Here is the coverage of different banks

ING
“We expect the BoC 9 June meeting to be quite uneventful and to have a contained market impact. The Bank’s concerns about a slower recovery should be offset by the fast vaccination campaign in Canada. We expect more tapering at the July meeting, which should allow CAD to trade below 1.20 in the summer.”

TDS
“The June BoC Announcement should be a relatively quiet affair. Despite a weaker than expected Q1, look for the Bank to argue that the outlook is unfolding roughly in-line with their April forecast. We expect the forward-looking passage to signal 2022H2 rate hikes, and we do not expect any change in QE at this meeting. The risks for CAD skew negatively, reflecting its status as the most overbought and well-populated currency in the G10 now. Momentum has been a key feature, especially as the broad USD has tanked since April. Still, any signs of caution from the BoC would reset the scales, where our short-term valuation models imply a level around 1.24.”

Citibank
“We do not expect any change in policy at the BoC meeting on June 9, with the pace of QE purchases remaining at C$3 billion per week after the reduction at the April meeting. Language around inflation should be updated to acknowledge the above-target 3.4% headline CPI, though looked through by the BoC. More interesting could be any acknowledgment of core inflation measures returning to the 2% target as the latest estimates now show the output gap closing in H2-2022. Our base case remains that the next reduction in asset purchases will occur in July.”

RBC Economics
“The BoC is likely to posit that near-term increases in consumer price growth rates will prove ‘transitory.’ But there have also been signs of harder-to-dismiss firming in most measures of underlying price growth gauges, including the BoC’s own preferred core measures edging up towards or above the 2% inflation target. The overnight rate is expected to be held at 0.25% with markets watching for any change in language regarding further adjustments to the asset purchase program. We expect a stronger economic growth backdrop and firming underlying inflation pressures will ultimately prompt the central bank to begin to reduce policy accommodation with further tapering of the QE program later this year with rate increases unlikely until the second half of 2022.”