Bank of Canada makes interest rate announcement | Mar 07, 2018

Good news…No increase to Bank of Canada rate yesterday!

A cautious Bank of Canada kept its key interest rate on hold Wednesday as it bought itself more time to monitor mounting trade-related uncertainties out of the United States.

Many experts now believe the central bank will likely wait until the second half of the year before raising the rate again. Some say the next hike might not come until 2019 and at least one economist said Wednesday that, depending how things evolve, the bank could even lower the rate this year.

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The Bank of Canada kept its key interest rate target on hold as it pointed to a climate of broadening, important unknowns around trade.

In explaining its decision to maintain its benchmark rate at 1.25 per cent, the central bank notes that recent trade policy developments are a key source of uncertainty for the Canadian and global outlooks.

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U.S. President Donald Trump recently added threats of steel and aluminum tariffs to an already uncertain context for Canada that includes concerns over NAFTA’s renegotiation and competitiveness following tax-cut announcements south of the border.

The Bank of Canada notes fourth-quarter growth was weaker than expected, largely due to higher imports, and that it’s still assessing impacts on housing markets from new policies, including mortgage rules.

But it says global growth continues to be solid and broad-based, the economy is running near capacity, inflation is close to target and wage growth has improved, although still remains below where many expect it should be.

Governor Stephen Poloz was widely expected to hold off moving the rate because of weaker economic numbers in recent weeks and the expanding trade uncertainty.

Poloz has introduced three rate hikes since last summer, including an increase in January. The moves came in response to an impressive economic run for Canada that began in late 2016.

In the statement Wednesday, the bank reiterated it expects more hikes to be necessary over time, but that the governing council will remain cautious when considering future decisions.

They will continue to be guided by incoming data, such as the economy’s sensitivity to higher rates, the evolution of economic capacity and changes to wage growth and inflation, it said.

Source:The Canadian Press

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