Bank of Canada maintains interest rate: Read the official statement

Bank of Canada

Bank of Canada

The Bank of Canada, which is expected to leave its benchmark interest rate unchanged on Wednesday at 1.75 per cent, has expressed concern that trade uncertainty could hurt Canada's commodity-linked economy.

In its rate announcement, the Bank of Canada said there is early evidence that the global economy is stabilizing and growth is still expected to edge higher over the next couple of years.

"Future interest rate decisions will be guided by the Bank's continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy", policy makers led by Governor Stephen Poloz said in the statement.

A resilient Canadian economy has allowed the Bank of Canada to keep interest rates on hold even as many of its worldwide peers have moved to ease monetary policy amid concerns about the global economy.

"Indeed, ongoing trade conflicts and related uncertainty are still weighing on global economic activity, and remain the biggest source of risk to the outlook".

The Canadian dollar extended gains on the decision, up 0.6% to C$1.3219 per USA dollar at 10:20 a.m. Toronto time, as investors pared bets on future cuts. "Today's statement can be characterized as glass half full". Markets are also pricing in one rate cut over the next 12 months.

Economic growth in Canada slowed to an annual pace of 1.3 per cent in the third quarter, in line with what the central bank forecast, but the Bank of Canada noted investment spending was stronger than expected.

It says it will be assessing the extent to which the improvement points to renewed momentum in investment. -China trade deal would be delayed and awaited a Bank of Canada interest rate decision this week. Credit growth and real estate activity are re-accelerating in the second half of this year, propelled in part by lower interest rates imported from overseas, and any additional stimulus by the Bank of Canada could fuel risks.

"The bank continues to monitor the evolution of financial vulnerabilities related to the household sector", they said in the statement. Inflation will increase temporarily in the coming months due to year-over-year movements in gasoline prices.

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