Bank of Canada to make interest rate decision, expected to hold steady

Bank of Canada to make interest rate decision, expected to hold steady

Bank of Canada to make interest rate decision, expected to hold steady

The country's central bank said the outlook for the global economy has weakened further since its last report in July. More than 30 central banks have eased monetary policy this summer and most analysts think it is only a matter of time before Canada follows. We've also had the Federal elections, which saw Canada's Prime Minister Justin Trudeau's Liberal Party lose 20 seats, which left them 13 seats short of a majority.

The Fed is announcing another interest rate decision today, and markets expect yet another.25% cut. We can point to 2015 when the BoC rapidly changed its tune and cut rates in response to plunging oil prices and the fears for what it might mean for the broader economy.

The Bank of Canada could soon capitulate and cut interest rates because of the trade wars.

The bank said government spending and low borrowing rates are now supporting domestic demand, and activity in the services sector remains robust. Four hours later, in rare back-to-back decisions for Canada and the USA, the Federal Reserve is expected to reduce borrowing costs for a third time since June.

That's easily the best the central bank has done in hitting its target over a prolonged period, and reflects an economy running nicely at about its capacity - neither too hot nor too cold.

"This reads dovishly", said Andrew Kelvin, chief Canada strategist at TD securities.

Poloz said the bank had studied whether the insurance provided by a cut might trigger higher financial vulnerabilities as well as economic and inflationary consequences.

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The Bank of Canada is shown in Ottawa on Wednesday, April 24, 2019.

No such cut was considered in September, Poloz said during a news conference, although "certainly we could see which way the winds were blowing".

Following Canada's unexpectedly strong second-quarter growth at an annual rate of 3.7 per cent, the bank predicts expansion at an annual pace of just 1.3 per cent in each of the final two quarters of 2019.

"The Canadian dollar has been relatively stable in its primary exchange, which is against the US dollar". "It's on these margins people are mentioning it's a little harder to compete".

Markets, however, will be focused on what could happen in the coming months - and they will study governor Stephen Poloz's take on the state of the Canadian and global economies. Moreover, it will 'pay close attention to the sources of resilience in the Canadian economy notably consumer spending and housing activity as well as to fiscal policy developments. "Tariff and trade restrictions will work over time to permanently reduce potential output everywhere, while raising the prices of consumer goods", Poloz said.

Here are some of the reasons Canadian policy makers are resisting the dovish turn in global monetary policy and adopting a wait-and-see approach.

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