Stephen Poloz, Governor of the Bank of Canada concludes a news conference concerning the rise of the bank’s interest rates, in Ottawa, Tuesday July 12, 2017. (Fred Chartrand/The Canadian Press)

Central bank holds rate, notes ‘increased uncertainty’ on timing of future hikes

Central bank’s trend-setting interest rate is staying at 1.75 per cent for a third-straight announcement

The Bank of Canada left its key interest rate unchanged Wednesday and pointed to ”increased uncertainty” about the timing of future rate hikes following the economy’s abrupt deceleration in late 2018.

The central bank’s trend-setting interest rate is staying at 1.75 per cent for a third-straight policy announcement — a stretch that comes after governor Stephen Poloz introduced five rate hikes between mid-2017 and last fall.

Notably, the bank’s statement Wednesday dropped language from its release in January that said the governing council expected the rate would need to rise over time to an estimated destination range of between 2.5 and 3.5 per cent.

“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,” said the statement, which explained some of the factors behind the decision.

“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.”

Last week, Statistics Canada released a report that showed the country, over the final three months of 2018, delivered its weakest quarter of economic growth in two and a half years. Economic growth slowed to an annualized pace of just 0.4 per cent.

In its statement Wednesday, the central bank said it had been expecting a drop in household spending as well as weak numbers for exports and investment in oil-producing provinces in the fourth quarter.

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

READ MORE: Bank of Canada holds interest rate, views oil slump as temporary soft patch

READ MORE: Bank of Canada says Canadians owe $2 trillion as it mulls next rate hike

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 last year.

Poloz noted in January that “as the snow melts, we’ll have a clearer view that the economy is back on track and then likely to grow above or around two per cent after that.”

A fresh economic start by spring no longer appears to be in the forecast.

The first half of 2019, the bank added, is now on track to produce weaker numbers than its projection two months ago.

“Consumer spending and the housing market were soft, despite strong growth in employment and labour income,” the statement said.

“Both exports and business investment also fell short of expectations.”

Statistics Canada said the late-2018 slowdown was mostly due to a 2.7 per cent contraction, on a quarter-over-quarter basis, in investment spending. Overall exports saw a slight decline and household spending slowed for a second straight quarter.

Heading into the decision Wednesday, the Bank of Canada was widely expected to leave the key interest rate untouched.

Many analysts have predicted the bank will wait until at least late 2019 before introducing another rate hike. There have also been doubts whether Poloz will raise the rate again this year — or whether his next move will even be a hike.

The central bank’s next policy decision is scheduled for April 24 when it will also update its economic outlook in its monetary policy report.

On Wednesday, the bank said the global economy’s deceleration has been more pronounced than expected — and more widespread.

The moderation, it added, has been caused in large part by concerns related to trade tensions and uncertainty. The bank, however, noted that global economic prospects would improve if ongoing trade conflicts are resolved.

The bank predicted inflation to stay slightly below its ideal two per cent target through most of the year.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

North Delta MLA Ravi Kahlon cleared of conflict allegations

Commissioner finds MLA’s father’s taxi licence doesn’t equal a conflict of interest while working on ride-sharing regulations

Grieving South Surrey mom ‘disappointed’ province not moving quicker to fix recovery homes

Min. Judy Darcy says new regulations, effective Dec. 1, follow ‘many horror stories’

B.C.’s health, addictions ministers to announce changes to recovery-house rules

Safety, quality of care targeted; South Surrey parent whose son overdosed ‘curious’ about amendments

Potters’ House of Horrors sets date for opening weekend in Surrey

The ‘Death Valley Motor Inn’ is an all-new haunted house this year

Surrey school district unveils its first rainbow crosswalk

Superintendent Jordan Tinney says colour crossing ‘a statement that everyone is welcome in Surrey’

Pickle me this: All the outrageous foods at this year’s PNE

Pickled cotton candy, deep-fried chicken skins, and ramen corndogs are just a start

New study suggests autism overdiagnosed: Canadian expert

Laurent Mottron: ‘Autistic people we test now are less and less different than typical people’

B.C. father tells judge he did not kill his young daughters

Andrew Berry pleaded not guilty to the December 2017 deaths

Trans Mountain gives contractors 30 days to get workers, supplies ready for pipeline

Crown corporation believes the expansion project could be in service by mid-2022

Mammoth sturgeon catch was ‘a fish of a lifetime’ for Chilliwack guide

Sturgeon was so enormous it tied for largest specimen every tagged and released in the Fraser

Fraser River sea bus proposed to hook into TransLink system

Maple Ridge councillor just wants to start discussion

Rosemount cooked diced chicken linked to listeria case in B.C.

The symptoms of listeria include vomiting, nausea, fever, muscle aches

Body found believed to be missing Chilliwack senior with dementia

Police say case is now in the hands of the coroner

Most Read