By Gordon Isfeld
OTTAWA (MaceNews) – The Bank of Canada is maintaining its level of economic stimulus, choosing to keep the key overnight interest rate at 1.75% in response to slower-than-anticipated growth in this country and many other major industrialized nations.
“Ongoing uncertainty related to trade conflicts has undermined business sentiment and activity, contributing to a synchronous across many countries,” the Bank of Canada said Wednesday.
“In response, many central banks have signaled a slower pace of monetary policy normalization. Financial conditions and market sentiment have improved as a result, pushing up prices for oil and other commodities.”
For the Bank of Canada, that means policymakers will consider maintaining the current amount of stimulus at 1.75% – a level that has been consistent since October, when the key lending level was raised from 1.5%.
“Trade tensions and elevated uncertainty have been important drivers of growth dynamic for both the global and Canadian economies, although some factors specific to Canada are playing a role,” the central bank said in its quarterly Monetary Policy Report, although policymakers said “dampening effects” on oil prices, as well as tighter housing policies, “should dissipate over 2019.”
Even so, monetary policymakers are anticipating that global economic growth – pegged at 3.2% for 2019 – will gradually improve to 3.3% in 2020 and 2021, thanks in large part to an expected improvement in global financial conditions and increased commodity prices.
“We will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive,” the central bank said Wednesday. “In particular, we are monitoring developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating.”
On a longer timeline, Canada’s central bank estimates economic growth will expand by an average rate of 1.8 per cent through 2021, followed by an expected 1.9-per-cent gain in 2022, according to an internal analysis issued Wednesday.
“Based on various alternative scenarios, the range for potential output growth estimates widens from 1.5% to 2.1% in 2019 to 1.3% to 2.5% in 2022.”