The Bank of Canada has set aside discussion of interest rate hikes, at least until the economy re-emerges from what it predicts will only be a temporary slowdown.
The central bank kept its key interest rate unchanged Wednesday and appeared to be in no hurry to move the benchmark any time soon. Unlike the bankB次元官网网址檚 recent statements, the announcement made no mention of a need for future increases.
READ MORE:
The bank also cut its 2019 growth forecast, a number weighed down by its prediction the economy nearly ground to a halt at the start of the year.
The decision Wednesday to stand pat, which was widely expected, left the rate at a still-stimulative 1.75 per cent for a fourth-straight announcement. The pause has followed a strong stretch for the economy that saw governor Stephen Poloz introduce five rate hikes between mid-2017 and last fall.
The economy had been running close to full tilt for most of 2017 and 2018, the bank said, before a sudden deceleration in the final three months of last year.
Poloz said the changing conditions have made the bank B次元官网网址漝ata dependent in both directions.B次元官网网址�
B次元官网网址淕iven where we are today we think that rates are appropriate for this outlook,B次元官网网址� Poloz told reporters in Ottawa.
B次元官网网址淚f there was a new, negative disturbance B次元官网网址� that would be something weB次元官网网址檇 have to consider as fodder for whether interest rates needed to be revised down.B次元官网网址�
The soft patch, which was more severe than the bank anticipated in January, was largely caused by a drop in oil prices and unexpectedly weak numbers for investment and exports. It also underlined how weaker-than-expected housing and consumption bogged down the economy.
The negative effects have spilled into 2019, said the bank, which also released its latest quarterly projections Wednesday.
The bank is now predicting growth in real gross domestic product of 1.2 per cent for 2019, down from its January forecast of 1.7 per cent. It also projected growth at an annualized rate of just 0.3 per cent in the first three months of 2019.
Poloz, however, was optimistic about the rest of the year and beyond B次元官网网址� once Canada gets past what he called a B次元官网网址渄etour.B次元官网网址�
The bank predicted the economy to pick up its pace in the second quarter on expectations of stronger housing activity, consumer spending, exports and business investment. It expects the economy to build momentum through 2019 before returning to above-potential growth of 2.1 per cent in 2020 and two per cent in 2021.
Poloz described the tone of the closed-doors policy discussion among governing council members as B次元官网网址渁 little bit skeptical of some of the most-negative dataB次元官网网址� thatB次元官网网址檚 been coming in. He added the skepticism also goes both ways, which is why incoming data will be important.
B次元官网网址淏y all bits of analysis itB次元官网网址檚 a temporary thing, but we need the proof,B次元官网网址� he said.
B次元官网网址淭he data from here will tell us what to do. But if our forecast is right, which I firmly believe it is, (then) what that means is that interest rates are more likely to go up than down over time.B次元官网网址�
The bank said it will pay close attention to the evolution of household spending, oil markets and global trade policy.
Even with the anticipated improvements, the bank avoided mentioning future rate hikes in its statement Wednesday like it had in the past.
B次元官网网址淕iven all of these developments, governing council judges that an accommodative policy interest rate continues to be warranted,B次元官网网址� the bank said.
B次元官网网址淲e will continue to evaluate the appropriate degree of monetary policy accommodation as new data arrive.B次元官网网址�
The central bankB次元官网网址檚 March rate announcement said there was B次元官网网址渋ncreased uncertainty about the timing of future rate increases.B次元官网网址� The January statement said the benchmark would need to rise over time to a so-called neutral range that had been estimated at between 2.5 and 3.5 per cent.
In addition to the change in the statementB次元官网网址檚 language, the central bank also updated its estimate Wednesday of the neutral B次元官网网址� or destination B次元官网网址� range, which is the preferred level when the economy is running at full capacity and when inflation is within its target zone of one to three per cent.
The bank said its new, slightly lower estimated range is between 2.25 and 3.25 per cent.
Many economists expect the bank to leave the interest rate untouched until at least late in the year, and some have warned a cut could arrive before the next increase.
The Bank of Canada will make its next policy announcement on May 29.
Looking ahead, the bank projects a gradual expansion of investment outside the oil and gas sector before it turns into solid growth in the second half of 2019. It expects the boost to come with companiesB次元官网网址� responses to capacity constraints, higher operating profits and investment incentives from the federal and Ontario governments.
Exports of goods and services, in particular, are expected to grow with a lift from foreign demand, though the bank noted thereB次元官网网址檚 still uncertainty given global trade tensions.
The bank predicts consumption to continue expanding along with growing wages B次元官网网址� even though households are burdened with high debt loads B次元官网网址� and for the dampening effects of recent housing measures to fade over time.
Andy Blatchford, The Canadian Press
Like us on and follow us on
