(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.

Just Posted

Watch Lake and District Women’s Institute celebrates 80th anniversary

‘It was well-attended and everybody was quite happy’

100 Mile House Rotary Club gets a visit from district governor

The 100 Mile House Rotary Club took Bala Naidoo, the district governor… Continue reading

What do you think the solution might be for the forest industry?

Kaye Castleman Gibsons, British Columbia “I wonder about our foresty policies and… Continue reading

Captured by Fire; two accounts of the 2017 wildfires

Authors are coming to 100 Mile House for the signing

From the archives of the 100 Mile Free Press

33 YEARS AGO (1986): The 108 airstrip would soon have a runway… Continue reading

VIDEO: Grizzly bears fight along northern B.C. highway in rare footage

Cari McGillivray posted the head-turning video, shot near Stewart, B.C., to social media

B.C. VIEWS: School officials join fact-free ‘climate strike’

Students, public get distorted picture of greenhouse gases

VIDEO: A moment to remember during the World Lacrosse Men’s Indoor Championship in B.C.

Diego Hernandez Valenzuela’s team lost, but he felt like a winner Saturday

Handgun crackdown, health spending and transit plans latest campaign promises

Friday was the end of a busy week on the campaign trail

B.C. woman photographs massive ant swarm on Abbotsford driveway

She asked what the ants were doing? The answer: war

Iconic 90s TV show ‘Friends’ celebrates 25th anniversary

The iconic, decade-long television show aired its first episode 25 years ago today

Police arrest B.C. phone scammer linked to illegal call centres in India

Person arrested in Burnaby here on a work visa, says police

Air Canada forced girl, 12, to remove hijab: civil rights group

The San Francisco Bay Area office of the Council on American-Islamic Relations calling for change

Most Read