Investing.com – The Bank of Canada (BoC) decided to keep its benchmark interest rate unchanged on Wednesday.
As expected, the BoC said it was holding its overnight cash rate steady at 1.25%. The bank rate is correspondingly 1.5% and the deposit rate is 1%
The central bank has raised rates three times since July 2017, but has now taken no action for three consecutive meetings, as the economy has gotten off to a mediocre start in 2018 compared with last year's robust growth rate.
Policymakers are also keeping a close eye on how heavily indebted Canadians and the housing market adjust to higher borrowing costs, and how uncertainty over the North American Free Trade Agreement (NAFTA) has restrained business investment
In the statement, the BoC noted that global economic activity was developing in line with its April projections, with some potential upside for the U.S. economy.
However, it indicated that ongoing uncertainty about trade policies is dampening global business investment and considered that stresses are developing in some emerging market economies.
“Overall, developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target,” the BoC stated, removing the prior wording that “some monetary policy accommodation will still be needed to keep inflation on target”.
Furthermore, the BoC omitted the idea that it will be “cautious” with policy tightening, stating simply that it “will take a gradual approach to policy adjustments, guided by incoming data.”
“In particular, the Bank will continue to assess the economy’s sensitivity to interest rate movements and the evolution of economic capacity,” the statement concluded.
Even prior to Wednesday's announcement, analysts had predicted that the next rate hike will come at the July 11 meeting when policymakers will update their economic forecasts.