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.