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Canada's central bank keeps interest rates unchanged at 1.75% optimistic about economic recovery
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09:06AM
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SMM News: the Bank of Canada announced a resolution on interest rates in May, leaving interest rates unchanged at 1.75 per cent, in line with the prevailing expectations of the market. The Bank of Canada kept interest rates stable, and the short-term reaction between the dollar and the Canadian dollar was limited, falling 9 points to 1.3497.

The Bank of Canada left interest rates unchanged for the fifth month in a row and continued to hint that it did not see the need to adjust borrowing costs in the short term, despite growing confidence that the economy was rebounding.

Policy makers in Ottawa said in an interest rate decision on Wednesday that the recent data "reinforced" their view that the economic slowdown in late 2018 and early 2019 was temporary. However, they said rising global trade risks were "exacerbating" the "uncertainty" surrounding the outlook.

"in this context, the level of easing offered by the current policy rate remains appropriate," the Bank of Canada said in a statement. " The statement reiterated that the central bank will continue to rely on data to closely monitor the development of household spending, oil markets and global trade.

The meeting did not mention any need to raise or cut interest rates.

The recent policy suspension, which has raised interest rates five times since 2017, reflects that the Canadian economy, which has just recovered from a severe slowdown, is still too fragile to cope with rate hikes. Even without the uncertainty of global trade, the recent weakness has led to enough easing, at least for now, to impose stimulus rates.

However, the Bank of Canada certainly did not show a tendency to consider easing policy, despite investors betting that the Bank of Canada would cut interest rates over the next 12 months.

Stephen S. Poloz, the governor of the Bank of Canada, has been reluctant to give up entirely his view that he could raise interest rates next, making him one of the more hawkish central bankers in the world. The positive tone of Wednesday's statement will only reinforce that position.

The statement said Canada's latest economic data were in line with the central bank's forecast last month, while there was "growing" evidence that Canada's economic growth began to accelerate in the second quarter. According to the report, some indicators "point" to the stabilization of the property market, the recovery in production in the oil sector, the strengthening of consumer spending and exports, the stabilization of business investment and job growth.

"continued strong job growth suggests that companies believe the weakness of the past two quarters is temporary," policy makers said. "

At the same time, inflation is also in line with expectations and is expected to remain at the central bank's target of 2%. The Bank of Canada said that the abolition of US metal tariffs and the prospect of improving the North American New Trade Agreement. Will have a positive impact on Canada's exports and investment. The global economy is also developing as expected, the report said.

Most analysts expect the Bank of Canada to raise interest rates again sometime next year, in line with the central bank's forecast that the Canadian economy will return to about 2 per cent growth by 2020 after stalling late last year and early 2019.

Investors are more pessimistic than analysts, betting on cutting interest rates, not raising them. They believe the possibility of a rate cut over the next 12 months is about 80 per cent. In the US, confidence in interest rate cuts has been strengthened by slowing global economic growth and weak US inflation data.

 

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