(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

Bashaw filmmakers produce striking short film

Documentary showcases how a unique ecosystem is surviving

Summer Villages halt Stettler County’s Buffalo Lake amendment request

White Sands and Rochon Sands oppose density increase at Buffalo Lake RV Resort

Central Alberta’s Gord Bamford adds Bashaw and Hanna dates to the #REDNEK Music Fest

The tour features Jess Moskaluke and other special guests

The Stettler Board of Trade welcomes 2020 board of directors

The board is an organization comprised of business owners and municipal representation

On Feb. 26th, practice kindness and wear pink to symbolize that you do not tolerate bullying

Bullying is a major problem in our schools, workplaces, homes, and online

Blair says RCMP have met Wet’suwet’en conditions, so barricades should come down

The Wet’suwet’en’s hereditary chiefs oppose the Coastal GasLink project

Federal minister pledges to meet Wet’suwet’en chiefs in B.C. over natural gas pipeline

The Wet’suwet’en hereditary chiefs say they are visiting Mohawk territory

Pipeline dispute: Tories put no-confidence motion on House of Commons agenda

Conservatives say they have no confidence in the Trudeau government to end the rail blockades

Blockade on CN rail line in Edmonton removed, injunction granted

The blockade consisted of wooden pallets on the tracks and signs that say ‘No Consent’

Canadians aboard coronavirus-ridden cruise ship to return home tonight

Among the infected are 47 Canadians who will have to remain in Japan for treatment

Carbon risk for Alberta’s public pension manager questioned

AIMCo says nearly $115 billion invested in carbon-intensive industries is on par with other funds

Worker, shocked at future Amazon warehouse in Nisku, has died: family

Colton Quast, 25, was taken to hospital and put in a medically induced coma

Blockade supporting Wet’suwet’en hereditary chiefs on rail line in Edmonton

‘Cuzzins for Wet’suwet’en’ post pics of wooden crates on line, signs saying ‘No Pipelines on Stolen Land’

Higher costs should kill Trans Mountain pipeline, federal opposition says

Most recent total was $12.6 billion, much higher than a previous $7.4-billion estimate

Most Read