Highlights of the week ended April 24

Note: This section contains information in English only.
Source: Dukascopy Bank SA
Canada
BoC Governor Stephen Poloz said the January interest-rate cut helped to put the nation's economy back on track amid rebounding crude prices, and added the biggest risk to the outlook may be outperformance of the US. Poloz became the first G-7 central banker to ease monetary policy in response to the sharp decline in oil prices, slashing the key rate in January to 0.75%. Poloz called it "insurance" against the effect of the downturn. In the aftermath of the surprise decision, bets on another cut this year surged. Though expectations fell as the central bank signalled more confidence in the economy and as prices for oil, a major Canadian export, stabilized and recovered partially, the market was still betting on a 35% chance of a rate cut in July. Poloz, however, said the BoC must consider the possibility that oil could renew its downward trend. The biggest "risk" to the bank's outlook is the possibility the US economy will expand faster than expected, he said, noting that it would be a positive risk as strong US demand would stimulate Canadian economic growth.

Australia
The RBA signalled further interest rates cuts may be required to help rebalance the Australian economy that is struggling to grow. Minutes from the RBA's April board meeting showed the central bank is keeping the door open for a further interest rate cut after surprising markets twice by maintaining the official cash rate steady at 2.25%. The central bank justified its decision to keep rates on hold in April as it wanted to assess more economic data, including inflation trends, before taking further monetary decision. RBA members agreed that the outlook for the economy remained subdued, especially given that the drop in mining investment is yet to bottom out, which would signal that further easing will be required. According to the RBA, one of the keys to underpinning the investment-drained economy is a lower exchange rate, acknowledging in the minutes that further declines in the Australian Dollar are likely, which would help rebalance growth. RBA governor Glenn Stevens reiterated that further rate cuts remained on the table, as the inflation outlook was expected to stay benign.

UK
BoE officials voted unanimously to maintain interest rates unchanged at a record low of 0.5% in April, with very low inflation being the main reason for keeping a steady stance on monetary policy. Yet, while the central bank expected consumer inflation to briefly slide into negative territory in the coming months, it saw a faster rebound of inflation once the effect of cheap oil and food drops out of CPI calculations towards the end of this year, and the effect of the Pound's appreciation dissipates faster than expected. The central bank added that the UK domestic data had been broadly in line with its February forecasts, while the Euro zone appeared to be recovering more strongly than thought. Governor Mark Carney and other policymakers have said they expect the next move by the Bank to be a rate hike.

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