The Bank of Canada will hold off on cutting interest rates until at least October.
The Bank of Canada agrees with most other major central banks that it should cut interest rates–but not yet.
The consensus agreed by Governor Stephen Poloz and his deputies this week was to leave the benchmark rate hanging at 1.75 per until at least the end of October, when the bank’s leaders will meet again to reconsider the policy.
“Canada’s economy is operating close to potential,” the Bank of Canada said in its new policy statement, published Sept. 4. “However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies. In this context, the current degree of monetary stimulus remains appropriate.”
The decision suggests that those responsible for policy believe there is enough stimulus within the Canadian economy to stave off the effects of the ongoing trade wars for the time being–even as non-energy exports and services fell this spring, and business investment in machinery and equipment plunged significantly in the second quarter.
The central bank estimated that Canada’s potential, or non-inflationary rate of growth stands at about 1.8%. The economy rose to an annualized pace of nearly 4% in the second quarter, making up for ground lost over the winter when it nearly entered recession.