Bank of Canada holds rates, warns economy will be 'tested'

Bank of Canada holds rates - Micah verceles
Bank of Canada holds rates

The Bank of Canada forecast a weaker outlook for the domestic economy amid heightened global downside risks, potentially giving itself more leeway to lower borrowing costs.

In a decision Wednesday, policy makers kept their current 1.75 per cent policy rate unchanged for an eighth straight meeting, calling the level “appropriate” even as they cut their growth forecasts for the next two years.

But there were changes to the statement compared with the one from September that suggest officials have become less confident in the face of a weakening global economy. These include removing explicit references to Canadian rates being stimulative and to the nation’s economy operating close to potential. Wednesday’s statement also referred to the recent gain in the country’s dollar.

The central bank “is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist,” policy makers led by Governor Stephen Poloz said in the statement. “In considering the appropriate path for monetary policy, the Bank will be monitoring the extent to which the global slowdown spreads beyond manufacturing and investment.”


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