The Bank of Canada kept its key overnight lending rate at 2.75% again Wednesday.
This marks the second straight hold after the central bank’s rate-cutting streak of seven consecutive reductions ended in April amid the trade war with the U.S. that is wreaking havoc on Canadian monetary policy.
In recent months, the BoC has adopted a strategy that puts more emphasis on assessing short-term impacts, such as economic shocks, economic shocks, rather than usual long-term outlooks when considering whether to hike, hold or cut rates.
The BoC maintained the hold because the bank’s governing council wants to get more information on how U.S. tariffs on Canadian imports could further affect Canada’s economy, BoC Governor Tiff Macklem said during a news conference after Wednesday’s decision.
The hold and Macklem’s comments came on the same day that U.S. President Donald Trump imposed a 50% tariff on steel imports from Canada and a number of other countries, with the exception of the U.K.
“Uncertainty remain high,” Macklem told reporters.
BMO Chief Economist Douglas Porter told The Canadian Press that the uncertainty “really is a doubled-edged sword” for the BoC.
“It doesn’t mean that they should cut more or less,” Porter told CP. “It just makes it more and more uncertain, and they almost have to take it on a meeting-by-meeting basis.”
The hold was widely expected.
First-quarter Canadian economic growth exceeded the bank’s expectation, but compound growth came in as anticipated, Leslie Preston, a TD Bank managing director and senior economist, wrote in a research note provided to Connect. She noted that the economy is softer but not sharply weaker. However, the bank remains concerned about unexpected firm inflation and its preferred measures of inflation have risen.
The BoC also expects the economy to be “considerably weaker” in the second quarter as strong exports and inventories reverse while demand remains “subdued.”
“We expect that barring a trade negotiation miracle with the Trump administration, Canada’s economy is likely to tip into recession this year, and more interest-rate cuts will be required,” wrote Preston.
By: Monte Stewart @Connect Canada
More Real Estate news or market reports, please check here.
Contact us for a Free Home Evaluation.
Comments:
Post Your Comment: