Stephen Poloz, Governor of the Bank of Canada concludes a news conference concerning the rise of the bank’s interest rates, in Ottawa, Tuesday July 12, 2017. (Fred Chartrand/The Canadian Press)

Central bank holds rate, notes ‘increased uncertainty’ on timing of future hikes

Central bank’s trend-setting interest rate is staying at 1.75 per cent for a third-straight announcement

The Bank of Canada left its key interest rate unchanged Wednesday and pointed to ”increased uncertainty” about the timing of future rate hikes following the economy’s abrupt deceleration in late 2018.

The central bank’s trend-setting interest rate is staying at 1.75 per cent for a third-straight policy announcement — a stretch that comes after governor Stephen Poloz introduced five rate hikes between mid-2017 and last fall.

Notably, the bank’s statement Wednesday dropped language from its release in January that said the governing council expected the rate would need to rise over time to an estimated destination range of between 2.5 and 3.5 per cent.

“Given the mixed picture that the data present, it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook,” said the statement, which explained some of the factors behind the decision.

“With increased uncertainty about the timing of future rate increases, governing council will be watching closely developments in household spending, oil markets, and global trade policy.”

Last week, Statistics Canada released a report that showed the country, over the final three months of 2018, delivered its weakest quarter of economic growth in two and a half years. Economic growth slowed to an annualized pace of just 0.4 per cent.

In its statement Wednesday, the central bank said it had been expecting a drop in household spending as well as weak numbers for exports and investment in oil-producing provinces in the fourth quarter.

But it acknowledged the slowdown ended up being “sharper and more broadly based” than it had anticipated.

READ MORE: Bank of Canada holds interest rate, views oil slump as temporary soft patch

READ MORE: Bank of Canada says Canadians owe $2 trillion as it mulls next rate hike

The central bank had been warning Canadians to expect a soft patch in late 2018 and early 2019 primarily due to the steep drop in oil prices late last year.

Poloz noted in January that “as the snow melts, we’ll have a clearer view that the economy is back on track and then likely to grow above or around two per cent after that.”

A fresh economic start by spring no longer appears to be in the forecast.

The first half of 2019, the bank added, is now on track to produce weaker numbers than its projection two months ago.

“Consumer spending and the housing market were soft, despite strong growth in employment and labour income,” the statement said.

“Both exports and business investment also fell short of expectations.”

Statistics Canada said the late-2018 slowdown was mostly due to a 2.7 per cent contraction, on a quarter-over-quarter basis, in investment spending. Overall exports saw a slight decline and household spending slowed for a second straight quarter.

Heading into the decision Wednesday, the Bank of Canada was widely expected to leave the key interest rate untouched.

Many analysts have predicted the bank will wait until at least late 2019 before introducing another rate hike. There have also been doubts whether Poloz will raise the rate again this year — or whether his next move will even be a hike.

The central bank’s next policy decision is scheduled for April 24 when it will also update its economic outlook in its monetary policy report.

On Wednesday, the bank said the global economy’s deceleration has been more pronounced than expected — and more widespread.

The moderation, it added, has been caused in large part by concerns related to trade tensions and uncertainty. The bank, however, noted that global economic prospects would improve if ongoing trade conflicts are resolved.

The bank predicted inflation to stay slightly below its ideal two per cent target through most of the year.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

VIDEO: Young balance-bikers race through Surrey’s Civic Plaza at Strider Cup

The course has several obstacles including ‘Mount Scary’ and the ‘Noodle Monster’

White Rock Beer For The Pier to go on sale early this week

Restaurants, bars and liquor stores from Vancouver to Chilliwack will sell new brew

45-year-old ID’ed as victim of South Surrey stabbing

Delphin Paul Prestbakmo died at the scene, near 18 Avenue and 152 Street

‘Potentially life-threatening’ injuries in overnight Surrey crash

Police had Highway 10 between 180th and 186th streets closed for several hours

Support granted for NatureKids

Program provides opportunities for youth and families to learn about and enjoy the outdoors

VIDEO: Langley Ribfest met with protesters

Groups that oppose the event for various reasons plan to be on site each of the three days.

Canadians killed in Afghanistan honoured during emotional dedication ceremony

One-hundred-fifty-eight Canadian soldiers died during the mission

It’s snow joke: Up to 30 cm of snow expected to fall in northeastern B.C.

Alaska Highway, Fort Nelson to be hit with August snowstorm, according to Environment Canada

‘I’m just absolutely disgusted’: Husband furious after B.C. Mountie’s killer gets day parole

Kenneth Fenton was sentenced to prison after he fatally struck Const. Sarah Beckett’s cruiser

Sea-to-Sky Gondola in B.C. likely out of commission until 2020

Sea to Sky Gondola carries between 1,500 and 3,000 people every day during the summer season

PHOTOS: Weapons seized at Portland right-wing rally, counterprotests

Not all who gathered Saturday were with right-wing groups or antifa

Maple Ridge’s first retail cannabis store opens Monday

Spiritleaf is just the second private pot shop in the Fraser Valley

Discussion on grief and loss between Stephen Colbert, Anderson Cooper goes viral

The exchange includes emotional question from Cooper, and outlook on grief as a child

Toronto activist calling on federal parties to nominate more black candidates

Fewer than 20 black Canadians have been nominated so far, including some Liberal MPs seeking re-election

Most Read

l -->