(The Canadian Press)

Bank of Canada holds interest rate as it takes stock of trade war impacts

The move kept the central bank’s overnight rate at 1.75 per cent

The Bank of Canada is holding steady on interest rates as it gauges the extent of the damage that deepening trade conflicts have had on the domestic and global economies.

The rate decision Wednesday, which was widely expected, kept the central bank’s overnight rate at 1.75 per cent and followed a solid second-quarter rebound for the Canadian economy.

But the bank’s accompanying policy statement said some of the strength seen earlier this year will likely be temporary and it predicted economic activity to slow in the second half of 2019. It also underlined the weak spots — such as a sharp contraction in Canadian business investment that coincided with the increased trade tensions.

The intensification of the U.S.-China trade war has been a bigger drag on global economic momentum than the bank had predicted at its July 10 meeting, the statement said.

“Canada’s economy is operating close to potential and inflation is on target,” the bank said in the statement, its first public comments since the July rate announcement and monetary policy report.

“However, escalating trade conflicts and related uncertainty are taking their toll on the global and Canadian economies.”

The current level of policy stimulus remains appropriate and the bank will continue to monitor the evolving international conditions ahead of its Oct. 30 meeting, the statement said.

“As the bank works to update its projection in light of incoming data, governing council will pay particular attention to global developments and their impact on the outlook for Canadian growth and inflation,” said the bank, referring to next month’s rate decision and monetary policy report.

The bank said the unexpected strength in the second quarter was fuelled by rebounds in energy production and exports. Housing activity also bounced back faster than anticipated although the bank warned it could pile more debt onto already stretched households.

The statement noted that while wages have increased, consumer spending was unexpectedly weak in the second quarter.

Heading into the announcement, governor Stephen Poloz was widely expected to leave the rate unchanged, even as other central banks have begun to make or signal cuts.

Many analysts have predicted the bank will lower rates at its next rate announcement on Oct. 30, mostly due to expanding trade risks and the deteriorating global economy.

On Thursday, Bank of Canada deputy governor Lawrence Schembri will provide more detail about the governing council’s thinking when he gives a speech and holds a news conference in Halifax.

The bank’s decision Wednesday kept the rate at 1.75 per cent for seventh-consecutive policy meeting. The Canadian economy experienced an abrupt deceleration over the winter that nearly brought growth to a halt.

Last week, a report from Statistics Canada said the economy expanded at an annualized pace of 3.7 per cent in the second quarter, which was higher than the Bank of Canada’s projection of 2.3 per cent.

READ MORE: Inflation hits Bank of Canada 2% target for second straight month

Andy Blatchford, The Canadian Press


Like us on Facebook and follow us on Twitter.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Fracking the official cause of Sylvan Lake earthquake last spring

Alberta Energy Regulators declared their findings in a report released last month

ATM thefts down in Central Alberta in 2019

RCMP data also shows some aspects of property crime in the rural and municipal areas drop as well

Sylvan Lake veterinarian’s winter tips for four-legged friends

Dr. Sandy Jameson shares tips to help cats and dogs to stay safe and healthy during the winter

Sylvan Lake Wranglers soar over High River Flyers

The Sylvan Lake Wranglers came out of the Sunday night game with a 5-3 victory on home ice

Bantam West Central Tigers claw to victory over Medicine Hat

The West Central Tigers defeated the Medicine Hat Hounds 4-2 at the NexSource Centre on Jan. 18.

VIDEO: Nickelback gears up for nostalgia tour

Canadian band joins Stone Temple Pilots for a summer tour that includes just one stop in Canada

Canadian law firm launches class action on behalf of Iran flight victims

Flight 752 was shot down by Iran shortly after take off

Energy companies owe more than double the tax to Alberta municipalities

Survey says communities are owed $173 million — up 114% since last spring

No gondola from Banff to Mount Norquay, feds say

Parks Canada dismisses proposal for gondola, Grizzly Pavilion and boardwalks

U.S. officials confirm first case of Wuhan coronavirus near Seattle

The U.S. is the fifth country to report seeing the illness

Nine times lucky? Alberta’s Northern Cree takes another shot at Grammy gold

The group originates from the Saddle Lake Cree Nation in northern Alberta

Tax revolt? Unpaid taxes from energy companies to Alberta towns more than double

The association says they are owed a total of $173 million

New post-secondary funding model in Alberta tied to performance measures

By 2022, up to 40 per cent of post-secondary funding could be linked to performance

Alberta bulldog breeder ordered to refund B.C. buyer over puppy’s behaviour

Tribunal ruled a verbal agreement to send a new dog superseded the written contract

Most Read