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Free AccessMNI POLICY: BOC Key Rate Stays At 1.50%, As Expected>
By Courtney Tower
OTTAWA (MNI) - Following are the key points from the Bank of
Canada's interest rate announcement Wednesday, when the policy interest
rate was maintained at 1.50%, as expected:
- With its economic outlook for the Canadian and global economies
largely unchanged from what it perceived in July, when it raised the
policy rate to 1.50% from 1.25%, the BOC said data "reinforce" its
"assessment" that higher key rates will be warranted, based on incoming
data and applied gradually. "In particular, the Bank continues to gauge
the economy's reaction to higher interest rates," already applied, the
central bank said in its fixed-date rate decision. The BOC also is
"monitoring closely the course of NAFTA negotiations and other trade
policy developments, and their impact on the inflation outlook."
- The BOC said that "elevated trade tensions remain a key risk to
the global outlook" and were dragging down some commodity prices. There
were intensified financial stresses in some emerging market countries
but these had "limited spillover to other countries."
- Noting that Consumer Price Index inflation in July had moved up
to 3%, the top of the Bank's 1%-3% target range, the Bank said it was
due largely to a jump in air fares, adding inflation would move back to
the 2% mid-range target "in early 2019." Moreover, the Bank's core
measures of inflation "remain firmly around 2%, consistent with an
economy that has been operating near capacity for some time." It also
noted that "wage growth remains moderate."
- Canada's economy is evolving "closely in line" with the July
projection of growth averaging near the economy's potential, the Bank
said. First quarter growth of 1.4% on an annual basis was followed by a
second quarter rebound to 2.9% "as the Bank had forecast" (actually,
2.8% forecasted). The Bank saw GDP growth slowing "temporarily" in the
third quarter this year, on "further fluctuations in energy production
and exports."
- Uncertainty about trade policies "continues to weigh on
businesses," the Bank said. Despite some "choppiness in the data,"
business investment and exports had been "growing solidly for several
quarters." At the same time, housing market activity "is beginning to
stabilize as households adjust to higher interest rates and changes in
housing policies (meant to tame down activity)." Continuing gains in
employment and in labor income were helping to support consumption.
Meanwhile, credit growth had moderated and the household debt-to-income
ratio "is beginning to edge down."
The next rate decision date is October 24, when the market expects
a hike.
--MNI Ottawa Bureau; yali.ndiaye@marketnews.com
[TOPICS: M$C$$$,MACDS$]
To read the full story
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Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.