The Bank of Canada has set the key interest rate at 1.75% — the fourth straight hold
The Bank of Canada published a revised outlook on Wednesday that shows the economy stalled over the last six months, extinguishing the sparks that had caused policy makers to starting worrying about inflation.
“If everything turns out perfectly, there’s no rush to suddenly get back in the saddle” and resume raising interest rates, Poloz told reporters. “It’s more a question of letting the data speak,” he added. “Right now, we need some positive data to confirm that this outlook is the appropriate one.” Canada’s economy was cruising at the start of the last year when a plunge in oil prices, higher interest rates, and U.S. President Donald Trump’s trade wars converged to create a torrent of headwinds.
Policy makers said in the MPR that they correctly adjusted for the drag from lower oil prices. Their mistake was assuming that non-energy exports would gather momentum and that executives would increase investment in order to keep up with demand. Instead, both have struggled, robbing the economy of an offset to a decline in spending on real estate and weaker household consumption.
The prediction business is hard. Still, the big miss last year could undermine confidence in the Bank of Canada’s prediction that the soft patch is essentially over. The Bank of Canada predicts a rebound in the second half, sparked by an annual growth rate of 1.3 per cent in the current quarter.
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