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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Mar 05 2015

Bank of Canada Takes a Wait-And-See Approach

As the Bank of Canada (BOC) held its latest monetary policy decision meeting this week, ECRI updated its Canadian Future Inflation Gauge (CAFIG), providing valuable insight into pressures on monetary policy in the coming months.

The BOC kept its benchmark interest rate unchanged at its latest meeting, following its surprise 25 basis point rate cut in January, which was its first since the spring of 2009. The Bank seemed to pour cold water on the possibility of another near-term rate cut, noting that consumer price inflation “has fallen as expected,” and that “the current degree of monetary policy stimulus is still appropriate.” In the same vein, BOC Governor Stephen Poloz recently suggested that the Bank will take a wait-and-see approach to January’s rate easing.

However, with inflation continuing to descend, this policy could become increasingly untenable. In our latest CAFIG update, we provide key insight into the future trajectory of Canadian inflation, shedding light on its implications for any interest rate adjustment in the months ahead.

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