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By Greg Quinn
OTTAWA (MNI) - The Bank of Canada amplified its warnings about
global trade conflicts for a second meeting without giving a direct
signal about cutting its key interest rate, saying unexpected domestic
growth is keeping the economy on track.
The target rate on overnight loans remained 1.75% where it's been
all year, in line every prediction used to compile the MNI economist
median. The one-page statement from Ottawa largely kept a key phrase
about the rate being appropriate while saying the escalating U.S.-China
trade fight has pushed down prices for exported commodities and inverted
Canada's bond yield curve.
"In sum, Canada's economy is operating close to potential and
inflation is on target," at 2%, policy makers led by Governor Stephen
Poloz wrote in the decision. "However, escalating trade conflicts and
related uncertainty are taking a toll on the global and Canadian
economies. In this context, the curent degree of monetary policy
stimulus remains appropriate."
Other language in the statement signaled that trade risks may
dominate the next decision due Oct. 30, a few days after Canada
is set to hold a federal election. Dropping a reference to closely
tracking Canada's energy industry, the statement said "Governing Council
will pay particular attention to global developments and their impact on
the outlook for Canadian growth and inflation."
Days after U.S. President Donald Trump moved ahead with fresh
tariffs on China, the BOC said trade policies have weakened global
commerce and investment and sapped global "momentum" by more than the
central bank predicted in July.
Canada's economy showed unexpected strength in second-quarter GDP
growth and in the latest inflation report for July, the central bank
said, adding some of that appears temporary. The GDP report last
Friday showed growth at a 3.7% annualized pace, the fastest in two
years. Inflation was 2% in July, matching the BOC's target.
--MNI Ottawa Bureau, +1-613-314-9647, email@example.com