Bank of Canada Keeps Rate Unchanged Mentions Trade Uncertainty

The Bank of Canada did what was expected of it on Wednesday, opting not to change its benchmark interest rate from its current level of 1.25 per cent.

But in a statement, it seemed to hint at concern over growing trade protectionism in justifying the decision to not raise rates again this time around.

usdcad Canadian dollar graph, March 7, 2018

“Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks,” the bank said in an apparent reference to U.S. President Donald Trump’s controversial willingness to raise tariffs to protect U.S. industries.

The bank also noted disappointing Canadian GDP numbers, which have showed the Canadian economy expanded at an annual pace of just 1.6 per cent in the last half of 2017 — less than half the pace seen in the first half.

“The data releases are on the bank’s mind, including the weak merchandise trade data for January which is added to the list,” said Arlene Kish, an economist with IHS Markit.

And the bank mentioned a slowdown in the housing market. In January, new rules aimed at tightening the mortgage market came into force. That seems to have pushed people to buy in late 2017, before the rules came in, because more recent sales figures for January and February were down sharply from levels seen last year.

via CBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza