–Cites Declining Oil, Continued ‘Froth’ in Housing
By Peter Diekmeyer
OTTAWA (MaceNews) – The Bank of Canada Wednesday kept its policy interest rate steady at 1.75% for a second straight session, as expected, and slashed its GDP growth projection for 2019 to 1.7% from 2.1%.
The BoC cited numerous reasons for a more dovish tone in its Monetary Policy Report which was also released. These include weaker-than-expected consumer spending and housing investment, coupled with possible reverberations from the U.S.-China trade dispute on the global economy.
A sluggish energy sector was also a key factor.
WTI crude oil prices are trading 25% lower than the U.S. $70/barrel projected in the BoC’s previous monetary policy report. Alberta’s recently-announced cuts in Western Canada Select oil production, – due to lack of transportation infrastructure to get output to market, – are also expected to weigh on GDP growth.
Wage growth in Canada has also decelerated and the household debt-to-disposable income ratio was recently revised up to 173%, higher than it was in the U.S. during the global financial crisis.
The Bank of Canada has some room to maneuver. CPI inflation hit a one-year low of 1.7% in November and is expected to remain below 2% throughout 2019. The average of the BoC’s three core inflation measures edged down as well to 1.9%.
Furthermore, the Canadian dollar sank almost 8% against the greenback in 2018, making it the second-worst performer among Group-of-10 currencies. This should help Canadian exporters better tackle increasingly tougher global markets, the report said.