(June 16 – 17:40 ET) – Analysts expect the U.S. Federal Reserve Board to stand pat on interet rates. The Bank of Canada is expected to follow suit.
The Bank of Canada is ready to let the economy explore its limitations, say economists at RBC DS Global Markets. “In fact, there is what we see as the first hint that the Bank is leaning towards letting growth run and probing the economy1s capacity, much like the Fed has done over the past few years.”
Low inflation in a strong economy indicate that Canada may be experiencing structural productivity improvements, says RBC DS. “Consequently, there is very likely to be more capacity available now than previously believed.”
“Inflation has been somewhat lower than we had expected since late last year. This very favourable price performance suggests that our economy has not been pressing as hard against capacity as we had thought,” says Bank of Canada Governor, Gordon Theissen. “It gives us some more room to explore where the limits of that capacity really are. And this should give businesses a greater opportunity to exploit their new equipment and technology to the fullest.”
The April retail sales report — to be released next Wednesday — will be the big number next week. Both DS and CIBC World Markets are predicting a modest rise and minimal
market impact.
-IE Staff