Bank of Canada Holds Fire and Leaves Policy Interest Rate Unchanged at 1.75%

September 4, 2019

Canada’s overnight target rate has been 1.75% since the last of five 25-basis point hikes spaced between July 2017 and October 2018. With one after another central banks caving in to the global trends of slower growth, subdued wage and price pressure, and falling long-term market interest rates, the Bank of Canada Board stood its ground yet again. Some analysts looked for a cut today, and most believe it will happen at one of the two remaining scheduled policy meetings this year.

A released statement attributes shrinking world trade and weak business investment to the U.S.-China trade conflict and concedes that global headwinds have proven to be stronger than assumed in the last quarterly Monetary Policy Report. The statement also notes however, that second-quarter Canadian growth and July CPI inflation exceeded bank expectations, core inflation remains around the 2% target, and the economy is operating close to its supply-side non-inflationary potential. Accordingly, officials deemed 1.75% to still be an “appropriate” level but promised to monitory incoming data, paying “particular attention to global developments and their impact on the outlook for Canadian growth and inflation.”

The next policy review will be accompanied by an updated Monetary Policy Report.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



Comments are closed.