By Gordon Isfeld
OTTAWA (MaceNews) – Lower than expected economic growth in Canada, combined with signs of weaker expansion in the United States, will likely keep interest rates on hold in this country for the near future, the Bank of Canada said Wednesday.
The Bank left its trendsetting lending level on hold at 1.75%.
Recent economic data “suggest a slowdown in the global economy has been more pronounced and widespread than the bank had forecast” in January, the Bank said.
“While the sources of moderation appear to be multiple, trade tensions and uncertainty are weighing heavily on confidence and economic activity,” according to the central bank led by Gov. Stephen Poloz.
“It is difficult to disentangle these confidence effects from other adverse factors, but it is clear that global economic prospects would be buoyed by the resolution of trade conflicts,” the Bank said.
As well, the Bank is expecting “a temporary slowdown in late 2018 and early 2019, mainly because of last year’s drop in oil prices.”
Canada’s central bank has raised its key lending rate five times since September 2017, taking the level to 1.75% from%.
Although the country’s monetary policymakers currently expect economic growth will slow to 1.7% this year, they also anticipate a rebound to 2.1% in 2020 – thanks to relatively stronger output in the United States.
The next decision on borrowing costs will come April 24, along with the release of the BoC’s quarterly Monetary Policy Report that will provide a fresh look at the most recent economic data for Canada – and other major countries – along with updated forecasts on inflation and possible risks to those projections.
The central bank’s core inflation measures are currently near the 2% policy target.
“We judge that we will need to move our policy rate up into a neutral range over time, to a point where it is not stimulating or constraining economic growth,” Poloz told a Montreal business gathering on February 21.
“However, the path back to that neutral range is highly uncertain.”