Bank of Canada keeps interest rate unchanged

Marco Green
January 12, 2019

But main focus of investors remain on Bank of Canada's Monetary Policy Update scheduled to release tomorrow and USA crude oil inventory data which is expected to boost CAD bulls as forecasts hint at draw in stock pile information. After that, views diverge. For the second month in a row, it announced the economy isn't ready for an interest rate hike. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Spot US crude has been trading positive since trading session started for New Year and is up almost 8% as of today while Canadian crude oil price is also recovering in broad market.

"Stephen S. Poloz was appointed Governor of the Bank of Canada, effective 3 June 2013, for a term of seven years". The consumer sector has been carrying the Canadian economy for years, and this was by the central bank's design; its period of low interest rates after the Great Recession was entirely meant to keep consumer spending flowing while a heavily battered economy made some very hard adjustments. This boost in crude oil price is providing fundamental support to commodity linked currency Loonie which combined with US Greenback's weakness in broad market helped Loonie reach 4 week lows. The Bank of Canada will also release its quarterly economic forecasts Wednesday, followed by a press conference from Governor Stephen Poloz. United States growth in particular remains solid "but is expected to slow to a more sustainable pace through 2019", the bank said.

The Bank projects real GDP will grow by 1.7 per cent in 2019, 0.4 percentage points slower than the October outlook.

The bank's benchmark rate directly affects the interest rates that Canadian consumers get from their retail banks on their mortgages, loans or on their savings deposits. In comparison, the rest of the country has shown a steady level of wage growth in recent years and the bank remains hopeful it will pick up its pace.

Recent data have been promising.

That was before talk of a slowing global economy, stocks in bear market territory, and collapsing oil prices.

The Bank of Canada noted that household consumption and housing investment "have been weaker than expected" anyway, as Canadians struggle to adjust to the impact of tougher regulations weighing on the housing market, as well as the central bank's gradual increase of interest rates over the past 18 months as the economy has approached full capacity.

On Wednesday, Bank of Canada Governor Stephen Poloz acknowledged that housing "is taking longer to stabilize than we expected", and added that given the excesses that had built up in the overheated Toronto and Vancouver markets, "it is always hard to judge where the market will stabilize once the froth has been removed".

"The Bank of Canada has taken itself out of the rate hike game, and its message today suggests that it isn't quite as sure about when it will come off the sidelines and hike again", says CIBC chief economist Avery Shenfeld, in a research note.

But Poloz isn't sounding like someone who has given up on rate increases.

"Getting there, it's a journey and we expect over time to get there".

Other reports by Click Lancashire

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