The Bank of Canada has held rates again at 0.50%, as virtually everyone had expected.
“Overall, recent data on the global and Canadian economics have been consistent with the Bank’s projection of improving growth,” the bank wrote in a short accompanying policy statement.
“In Canada, recent consumption and housing indicators suggest growth in the fourth quarter of 2016 may have been slightly stronger than expected,” it added. “While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States.”
Notably, the Bank of Canada also held rates the last time around, which was two days before the inauguration of US President Donald Trump.
At the time, the bank wrote in the accompanying policy statement that “uncertainty about the global outlook is diminished, particularly with respect to the United States.” In particular, the bank was likely waiting to see what Trump, who had during his campaign espoused a protectionist agenda and articulated his intention to “renegotiate” the North American Free Trade Agreement, or NAFTA, would do once he stepped into office.
And this time around, appears to be more of the same, according to some Canada watchers.
“The main issue, however, is still the uncertainty around the direction of US fiscal and trade policy. While more clarity on this is unlikely in the near term, the Bank can afford to wait and see for now,” wrote David Madani, Senior Canada Economist at Capital Economics, after the decision crossed.
“Overall, while the drag on the economy from the oil price shock is over, housing investment could become a bigger drag than policymakers have assumed. The core CPI-common measure, which is less volatile and moves most closely with the output gap, is already dangerously low at 1.3%, so there isn’t room for error,” he added. “Accordingly, we still expect an interest rate cut to 0.25% later this year, a move we have pencilled in at the policy meeting in July.”
The Canadian dollar is down by 0.3% at 1.3337 per US dollar as of 10:04 a.m. ET.
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