Thursday, 13 December, 2018

Bank of Canada holds interest rate at 1.75 per cent

Bank of Canada Bank Of Canada Leaves Key Interest Rate Unchanged
Jean Garcia | 08 December, 2018, 23:30

Lower growth prospects are expected to reinforce Bank of Canada Governor Stephen Poloz's strategy of moving very gradually on increases to its overnight rate. The bank raised its rate to that level in October, the fifth time since the summer of 2017 that it made a decision to hike.

Bank economists say an unexpected dip in monthly gross domestic product figures in September and lower-than-expected oil prices so far in the fourth quarter have dampened growth expectations and placed in doubt forecasts for a January bank rate increase.

Core inflation running at the central bank's 2 percent target - and which indicates the economy is operating at close to capacity - is one key reason policy makers want to raise rates.

The bank also said recent data show that the economy has less momentum heading into the final quarter of 2018 related to factors such as a drop in business investment that the bank largely connects to trade uncertainty last summer.

Canada's central bank chief indicated during a news conference in Toronto on Thursday that he may not be able to do much to lift markets, which have slumped this week amid concerns that trade tensions between China and the US are far from resolved.

Weighing all of these developments, Governing Council continues to judge that the policy interest rate will need to rise into a neutral range to achieve the inflation target. Weaker oil prices and associated production cutbacks mean activity in the energy sector is set to be materially weaker than expected.

The persistence of the oil price shock, the evolution of business investment, and the Bank's assessment of the economy's capacity will also factor importantly into our decisions about the future stance of monetary policy.

12 die in bank robbery attempts, police shootout in Brazil
Macedo Landim said that two children, between 10 and 13 years old, were among the dead hostages. Latin America's largest nation routinely is the world leader in total annual homicides.

"It is already clear that a painful adjustment is developing for Western Canada, and there will be a meaningful impact on the Canadian macroeconomy", Poloz said in an address to be delivered at a breakfast event hosted by CFA Toronto.

He said oil and gas production now makes up just 3.5 per cent of Canada's economy, compared with six per cent in 2014.

The bank added that it will be watching for positive developments such as signs the economy can still grow without stoking inflation.

Moving forward, the bank will scrutinize the results of its quarterly survey of business executives, to be published December 21, for clues on corporate sentiment.

In a news conference Thursday following his speech, Poloz was asked about the chances a rate cut could be needed to deal with the latest oil slump.

"I'm just not going to comment on that for now", he said.

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