The Bank of Canada is taking a breather from its efforts to push up interest rates as it watches the fallout from the country’s trade showdown with the U.S.
The central bank opted to leave its key rate at 1.5 per cent Wednesday in spite of unexpectedly good economic conditions this summer.
“The bank is . . . monitoring closely the course of NAFTA negotiations and other trade policy developments, and the impact on the inflation outlook,” the bank said in a statement.
The bank added that “elevated trade tensions” remain a key risk to the global economy and are already depressing some commodity prices...
The bank readily acknowledges that economic conditions are ripe for more rate hikes, in spite of the trade uncertainty. The consumer price index hit 3 per cent in July – a surprise spike that the bank attributed to higher airfares. Economic growth was also hotter than expected in the second quarter, at a 2.9 per cent annual clip.
The bank also pointed out that household debt levels are coming down, the housing market is starting to stabilize and both business investment and exports are growing “solidly.”
Many economists are betting that the central bank will resume hiking at its next rate-setting announcement on Oct. 24, when the bank is due to release its next quarterly economic forecast...
This was excerpted from 5 September 2018 edition of The Globe and Mail.