Bank of Canada leaves key interest rate unchanged at 1.75%

10 March, 2019, 11:28 | Author: Eric Barnett
  • Canadian bank notes are seen Wednesday

In New York, U.S. markets fell for a fourth straight day, losing more than two per cent over that period.

The central bank made it clear that future rate hike plans are still on the table, but not imminent.

"Given the mixed picture that the data present, it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook".

"With increased uncertainty about the timing of future rate increases, governing council will be watching closely developments in household spending, oil markets, and global trade policy".

And inflation in Canada still is higher than benchmark interest rate, suggesting borrowing costs remain stimulative.

"Although we figured the economy was in for a detour at the end of a year ago, that detour may wind up being longer than we had expected", she said in the speech, which was to be delivered to the Hamilton Chamber of Commerce. Instead, growth slowed to 0.4 per cent.

The Bank of Canada says the economic slowdown that began at the end of previous year is a bit worse than it was expecting, including a sharper-than-anticipated slowdown in Canada's oil patch.

But it says the slowdown ended up being sharper and more broadly based than it had anticipated.


The central bank had been warning Canadians to expect a soft patch in late 2018 and early 2019 primarily due to the steep drop in oil prices late a year ago. We will publish a new forecast then, too. The statement also indicated that the Bank is likely to mark down its 2019 forecast: "it appears that the economy will be weaker in the first half of 2019 than the Bank projected in January". "We still expect Canadian economic growth to pick up later in the year, supported by ongoing strength in employment and rising wages", she said.

A lot of economic data have been disappointing, including exports, investment and consumption.

To be sure, Statistics Canada reported late in February that non-residential investment will rise 2.5 per cent in 2019, according to a survey of companies, compared with increases of 2.5 per cent previous year and 4.3 per cent in 2017. Consumption spending grew at the slowest pace in nearly four years, housing investment fell by the most in a decade, business spending dropped sharply for a second straight quarter, and domestic demand posted its largest decline since 2015.

Many analysts have predicted the bank will wait until at least late 2019 before introducing another rate hike.

Even if officials stick to an overall rate-hike story, they'll need to acknowledge the changed outlook.

The central bank's next policy decision is scheduled for April 24 when it will also update its economic projections.

The bank's policy decision and statement this week also came after governing council factored in the slowing global economy, which has been affected by trade tensions - particularly those between the United States and China - and other uncertainties, Patterson added.

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