Tuesday, April 21, 2009

Carney decides to cut

Well - not a total surprise that Carney and Co. went with a 25bps cut, though I still don't believe it will have any material effect. The real surprise was the commitment to keep the overnight rate at 25bps for the foreseeable future as well as no mention of quantitative easing in the BoC statement. Interestingly, the Bank has also downgraded its previously optimistic forecast from -1.2% in 2009 to -3% (my own current forecast is for -3.2%) and suggests that inflation will not return to target until midway through 2010 (my own model would suggest otherwise but I'm not entirely sold on my inflation equations and will be revisiting them once I have an afternoon free).

More to come when the Bank releases its Monetary Policy Update on Thursday.

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