New Governor may take bold step forward

Despite stronger economic data, there are good reasons to expect a more supportive policy statement next week. Although the new Governor Stephen Poloz has said nothing recently that indicates the Bank will drop its tightening bias, rising market rate expectations and bond yields against the uncertain economic outlook might prompt it to provide some additional forward guidance to markets. This could trigger a pullback in long rates, which, by supporting economic growth, would help the Bank achieve the inflation target over the two-year policy horizon.