After recent economic data showed a downward trend in consumer price inflation last month, one economist believes the Bank of Canada is likely to cut its policy interest rate this Wednesday.
During an interview with BNN Bloomberg on Monday, Carlos Capistran, head of Canada and Mexico economics at Bank of America Global Research, said that “everything is just pointing to the Bank of Canada having the space to cut the policy rate again (by) 25 basis points.”
Last month, the Bank of Canada cut the policy rate for the first time in four years, and Capistran believes Canada’s central bank is poised to cut again. But the decision, he said, could be complicated by the U.S. Federal Reserve’s policy stance.
“One reason (the BoC wouldn’t cut) is they may be waiting for the Fed,” Capistran explained. “The rate in the U.S. and the rate in Canada usually move in tandem. So there is a limit to what the Bank of Canada can do and cannot do with respect to the Fed. But we believe that right now if you look at the business cycle in Canada … I think the Bank of Canada can really cut this time.”
Capistran also commented on the strength of the Canadian dollar.
“I think the Canadian dollar is not a concern at all for the Bank of Canada at this point,” he said, referring to concerns that rate cuts could weaken the value of Canadian currency.
Anticipating the Bank of Canada to continue cutting rates, he added that a weakening dollar is “not really something we are expecting.”
To watch the rest of Capistran’s interview with BNN Bloomberg, watch the video above.