Bank of Canada’s Governing Council Holds its Fire

September 5, 2018

Four previous 25-basis point increases of the Bank of Canada overnight interest rate had been implemented in September 2017 and January, May and July of this year. More are likely to follow. But consistent with the Governing Council’s “gradual approach,” officials decided to keep the target rate unchanged at 1.50% after the review completed today. The Council’s next scheduled meeting is on October 24th. From a released statement today, it’s clear that the uncertain outcome of trade talks with the United States was a factor behind the decision not to hike the rate now. Inflation hit the 1-3% target ceiling in July but is expected to settle back toward the mid-point in 2019. Core inflation is around 2%, and wages are growing only moderately. The economy is progressing in line with the scenario laid out in the July Monetary Policy Report. “Despite choppiness in the data, both business investment and exports have been growing solidly for several quarters. Meanwhile, activity in the housing market is beginning to stabilize.”

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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