(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

VIDEO: Collision in Surrey breaks axle off SUV

Two people were reportedly sent to hospital

Students spend night at White Rock shelter

Students hear powerful stories about homelessness on the Semiahmoo Peninsula

PHOTOS: Snoozing seal pup captures attention at White Rock Pier

Dozens of seals spent the day at White Rock’s iconic structure

A look at White Rock’s next council agenda

Following a public hearing, council will hear annual reports from a number of its committees

‘Meet Your Muslim Neighbour’ event bridges gap on Semiahmoo Peninsula, association says

Event serves as an educational space for residents in South Surrey-White Rock

Teen with cancer whose viral video urged Canadians to vote has died, uncle tweets

Maddison Yetman had been looking forward to voting in her first federal election since junior high school

Security camera records hatchet attack on Langley store owner

Target escaped uninjured, but was ‘upset’ by incident

Rowing Canada, UVic investigate celebrated coach for harassment, abuse

Lily Copeland says she felt intimidated and trapped by Williams

Cleanup in the works after tanker truck fire leads to oil spill in B.C.’s Peace region

The province said the majority of the spilled oil likely burned away in the fire.

BC VIEWS: Action needed on healthcare workplace violence

While we’ve been talking about it, the number of B.C. victims has only grown

VIDEO: Vancouver Giants blank Cougars 4-0

Goaltender David Tendeck turned aside all 38 Prince George shots for his WHL-leading third shutout

Closing arguments begin in B.C. case launched in 2009 over private health care

Dr. Day said he illegally opened the Cambie Surgery Centre in 1996 in order to create more operating-room time

MacLean says “Coach’s Corner is no more” following Cherry’s dismissal from Hockey Night

Cherry had singled out new immigrants in for not honouring Canada’s veterans and fallen soldiers

Most Read