The Bank of
Canada (BoC) left its benchmark interest rates unchanged at 1.75 percent on
Wednesday, as widely expected.
In its policy statement, the Canadian central bank said that Governing Council judged it appropriate to maintain the current level of the overnight rate target. According to the BoC, the Governing Council is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist and it will pay close attention to the sources of this resilience (notably consumer spending and housing activity), as well as to fiscal policy developments.
It also added that Canada’s economy is expected to slow in the second half of this year to a rate below its potential due to the uncertainty associated with trade conflicts, continuing adjustment in the energy sector, and the unwinding of temporary factors that boosted growth in the second quarter. The BoC projects the real GDP to grow by 1.5 percent this year (up from its previous estimate of +1.3 percent), 1.7 percent in 2020 (down from +1.9 percent previously) and 1.8 percent in 2021 (down from +2.0 percent previously). Meanwhile, business investment and exports are seen to contract before expanding again in 2020 and 2021. In regard to price pressure, the Canadian central bank expects the CPI inflation likely to dip temporarily in 2020 as the effect of a previous spike in energy prices fades.
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