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BOC to hold interest rates despite weak data

BOC to hold interest rates despite weak data

Following the Bank of Japan’s decision on Tuesday, eyes will focus on the Bank of Canada’s monetary policy decision later on Wednesday, ahead of Thursday’s European Central Bank meeting.

Economists are confident that a rate cut is not necessary for the time being despite the weak economic data released in the fourth quarter.

According to a Reuter’s poll, nearly 70 percent of economists who submitted the central bank's year-end forecast sought to keep the key interest rate fixed at 1.75 percent this year, compared with just over half in a poll conducted before the previous meeting in early December.

Optimism among economists was driven in part by a trade agreement signed between China and the United States last week, after an 18-month trade war and the latest labor market data, which showed more than expected jobs added in December.

Employment data for December rose to 35,200 in December, compared to a decrease with more than 71,000 in November, close to a highest level in four decades.

The BOC is expected to rely on recovery in employment, remaining in a data-driven position and therefore unlikely to cut interest rates in 2020.

Moreover, the recovery in jobs during December is an encouraging sign that the weakness in the last quarter was temporary.

In the same vein, the governor of central bank of Canada Stephen Poloz said that the Canadian economy has shown sufficient flexibility for policymakers to keep interest rates steady in remarks last year.

He also added in his recent remarks earlier this month that the latest economic data was mixed, in addition to acknowledging the slowdown of employment opportunities, explaining that this decline will be compensated by increasing wages, while pledging to carefully monitor the data to see how the last moderation continues.

Inflation data also due on Wednesday may signal a 0.1 percent rise in December, compared to -0.1 in November, while the annual consumer price index is expected to remain unchanged at 1.9 percent.

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