{"id":216542,"date":"2019-05-29T19:28:59","date_gmt":"2019-05-29T23:28:59","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=216542"},"modified":"2025-01-13T14:24:32","modified_gmt":"2025-01-13T19:24:32","slug":"central-bank-holds-rate-as-it-balances-domestic-economic-pickup-with-trade-risks","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2019\/05\/29\/central-bank-holds-rate-as-it-balances-domestic-economic-pickup-with-trade-risks\/","title":{"rendered":"Central bank holds rate as it balances domestic economic pickup with trade risks"},"content":{"rendered":"
\"\"<\/a>
The\u00a0Bank\u00a0of\u00a0Canada\u00a0has been cautious with the interest rate due to the accumulation\u00a0of\u00a0high levels\u00a0of\u00a0household debt, which has built up after years\u00a0of\u00a0very low borrowing costs. (Shutterstock Photo)<\/figcaption><\/figure>\n

OTTAWA \u2014 The\u00a0Bank\u00a0of\u00a0Canada\u00a0left its key interest rate steady Wednesday as it looked to balance mounting evidence\u00a0of\u00a0a domestic economic pickup against the expanding risks\u00a0of\u00a0international trade conflicts.<\/p>\n

The central\u00a0bank\u00a0kept its trend-setting rate at 1.75 per cent \u2014 and governor Stephen Poloz appeared to be in no hurry to make a move, even as he pointed to economic improvements at home.<\/p>\n

The\u00a0bank\u00a0said in a statement that there’s \u201caccumulating evidence\u201d the economy has been re-emerging in the second quarter\u00a0of\u00a0this year following a period when economic growth nearly came to a halt.<\/p>\n

\u201cOverall, recent data have reinforced governing council’s view that the slowdown in late 2018 and early 2019 was temporary,\u201d said the\u00a0bank, which was widely expected to stick with a rate that’s been in place for seven months.<\/p>\n

Several recent economic indicators have been unexpectedly robust.<\/p>\n

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<\/p>\n

The central\u00a0bank\u00a0said data has shown the oil sector is beginning to recover, the national housing market is stabilizing and job growth remains strong. The numbers, it added, also point to growth in consumer spending, exports and business investment.<\/p>\n

However, the economy also faces expanding trade risks, the\u00a0bank\u00a0said, following the escalation\u00a0of\u00a0international conflicts and Chinese restrictions on Canadian goods that are already having \u201cdirect effects\u201d on exports.<\/p>\n

A bilateral diplomatic dispute that has festered for several months has led China to block some shipments\u00a0of\u00a0canola, pork and other products from\u00a0Canada.<\/p>\n

The trade dispute between the United States and China \u2014 the world’s two largest economies and\u00a0Canada’s top two trading partners \u2014 could have a big effect on the Canadian economy.<\/p>\n

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<\/p>\n

Other details\u00a0of\u00a0Canada’s trade picture were seen as positives. The\u00a0bank\u00a0said the removal\u00a0of\u00a0steel and aluminum tariffs as well as encouraging signs the updated North American free trade agreement is moving closer to ratification will help Canadian exports and investment.<\/p>\n

Taking these factors into consideration, the\u00a0Bank\u00a0of\u00a0Canada\u00a0said the current policy level is \u201cappropriate.\u201d<\/p>\n

\u201cGoverning council will remain data dependent and especially attentive to developments in household spending, oil markets and the global trade environment,\u201d the statement said.<\/p>\n

The\u00a0Bank\u00a0of\u00a0Canada\u00a0has been cautious with the interest rate due to the accumulation\u00a0of\u00a0high levels\u00a0of\u00a0household debt, which has built up after years\u00a0of\u00a0very low borrowing costs.<\/p>\n

Many experts expect the central\u00a0bank\u00a0to leave its key interest rate untouched until at least late in the year and perhaps longer. Some have predicted a rate cut will come before the next increase.<\/p>\n

Frances Donald, head\u00a0of\u00a0macroeconomic strategy with Manulife Asset Management, said the\u00a0bank\u00a0appears increasingly optimistic about the economy at home. The biggest challenge right now, she added, is tied to all the uncertainty in the world economy.<\/p>\n

\u201cThose global trade concerns could derail the domestic economy in\u00a0Canada,\u201d said Donald, who expects the\u00a0Bank\u00a0of\u00a0Canada\u00a0to leave the interest rate unchanged until the international trade issues sort themselves out.<\/p>\n

\u201cThe\u00a0Bank\u00a0of\u00a0Canada, just like all economists, is wrestling what to do when the domestic economy looks much better, but the global economy looks worse.\u201d<\/p>\n

BMO chief economist Douglas Porter wrote in a report following Wednesday’s announcement that it seems like the\u00a0bank\u00a0has \u201csettled in for a long pause\u201d on the interest rate and \u201cgave every indication that the bar is very high for a move in either direction.\u201d<\/p>\n

The next rate decision is scheduled for July 10, when the\u00a0bank\u00a0will also release its updated economic forecasts in its quarterly monetary policy report.<\/p>\n

Canada\u00a0will receive another important piece\u00a0of\u00a0information Friday with the release\u00a0of\u00a0its economic growth report for the first quarter.<\/p>\n

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<\/p>\n

Last month, the weaker economic data led Poloz to set aside talk\u00a0of\u00a0rate increases.<\/p>\n

The sudden down shift over the winter \u2014 caused mostly by a drop in oil prices \u2014 forced the central\u00a0bank\u00a0to cut its 2019 growth forecast. The reduction came after the economy ran at close to full tilt for most\u00a0of2017 and 2018 \u2014 a stretch that saw Poloz hike the interest rate five times.<\/p>\n","protected":false},"excerpt":{"rendered":"

OTTAWA \u2014 The\u00a0Bank\u00a0of\u00a0Canada\u00a0left its key interest rate steady Wednesday as it looked to balance mounting evidence\u00a0of\u00a0a domestic economic pickup against …<\/p>\n","protected":false},"author":44,"featured_media":211347,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-216542","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","mauthors-andy-blatchford","mauthors-the-canadian-press"],"_links":{"self":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216542","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/comments?post=216542"}],"version-history":[{"count":2,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216542\/revisions"}],"predecessor-version":[{"id":283631,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/216542\/revisions\/283631"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media\/211347"}],"wp:attachment":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media?parent=216542"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/categories?post=216542"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/tags?post=216542"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}