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)

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.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The team that disconnected, lifted and loaded the old Bobtail Road bridge. (Photo submitted)
Bobtail Road bridge moves to new home in Meridian Beach

The 100-year-old bridge was moved Jan. 14

Whether the Town of Ponoka gets enough ‘bang for its buck’ under its Alberta Urban Municipalities Association (AUMA) membership was discussed during town council March 26.
File photo
Town of Ponoka appoints Sandra Lund as CAO

Ponoka town council voted unanimously at its regular meeting on Jan.12 to… Continue reading

Kelowna RCMP Stock Image.
Ponoka RCMP respond to several B&E’s

Calls include complaint of a spray painted garage

Black Press file photo
Maskwacis male charged with 2nd degree murder

18-year-old Kaydence Clark Roasting of Ermineskin Cree Nation was arrested at his residence.

Alberta has 3,651 active cases of COVID-19.  (File photo)
750 new COVID-19 cases identified in Alberta Sunday

Central zone currently has 1,182 active cases of the virus

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

Catherine Hay. Photo Submitted
Central Albertan lobbying government to help those affected by CERB repayments

Catherine Hay says she received a letter in November saying she had to completely repay the benefit

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
No Pfizer vaccines arriving in Canada next week; feds still expect 4M doses by end of March

More cases of U.K. variant, South African variant found in Canada

Health-care workers wait in line at a UHN COVID-19 vaccine clinic in Toronto on Thursday, January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Canadians who have had COVID-19 should still get the vaccine, experts say

Pfizer-BioNTech and Moderna vaccines were found to have a 95 per cent efficacy

An empty Peel and Sainte-Catherine street is shown in Montreal, Saturday, Jan. 9, 2021, as the COVID-19 pandemic continues in Canada and around the world. THE CANADIAN PRESS/Graham Hughes
Poll finds strong support for COVID-19 curfews despite doubts about effectiveness

The poll suggests 59 per cent remain somewhat or very afraid of contracting COVID-19

Lacombe is looking at its options for reclaiming sewage lagoons that are no longer needed. Vesta Energy Ltd. has signed a deal to use three lagoons to store water for fracking.
Map from City of Lacombe
Energy company to use former Lacombe sewage lagoons to store water for fracking

Vesta Energy Ltd. will pay Lacombe more than $100,000 a year in 20-year deal

Alberta Chief Medical Officer of Health Dr. Deena Hinshaw said on Monday that11 more people had died from COVID-19, bringing the province’s death toll to 1,447. (Photography by Chris Schwarz/Government of Alberta)
Eleven more Albertans die from COVID-19

There were 739 people in hospital, 120 in ICU on Monday

World Juniors’ referee Mike Langin makes a called during the Canada vs. Slovakia at the 2021 World Junior Championship at Rogers Place in Edmonton, Dec. 27, 2020. (Photo by Matthew Murnaghan/Hockey Canada)
Former Sylvan Lake man lives his dream at World Junior Championships

Mike Langin was one the 25 Canadian officials who worked during the tournament

The Mountain Cree Traditional Band headquarters in Mirror, Alta. has been the target of theft and vandalism. (Photo submitted)
Mountain Cree Traditional Band’s headquarters broken into five times

AWNTB says not enough been done to deter crime in Mirror, Alta.

Most Read