Bank of Canada retains neutral bias

The monetary policy statement shows that the Bank of Canada isn't concerned about higher inflation, since the recent rise is due to temporary factors, rather than improvements in economic fundamentals. Although the Bank still believes that the ingredients for a pick-up in exports and investment remain in place, downgrades to its GDP growth forecasts show that it is less confident. Overall, this supports our view that interest rates will have to remain low for longer than the consensus view.