The Bank of
Canada (BoC) left its benchmark interest rates unchanged at 1.75 percent on
Wednesday, as widely expected.
In its policy statement, the Canadian central bank notes that evidence has been accumulating that ongoing trade tensions are having a material effect on the global economic outlook. Trade conflicts between the United States and China, in particular, are curbing manufacturing activity and business investment and pushing down commodity prices, the BoC added.
Meanwhile, Canada’s economy is returning to growth around potential, following temporary weakness in late 2018 and early 2019. The country’s Q2 growth appears to be stronger than predicted due to some temporary factors, including the reversal of weather-related slowdowns in Q1 and a surge in oil output. However, the outlook is clouded by persistent trade tensions, the BoC notes. Taken together, the degree of accommodation being provided by the current policy interest rate remains appropriate, the BoC said.
It also notes that inflation remains around the 2 percent target, with some recent upward pressure from higher food and automobile prices. However, CPI inflation will likely dip this year because of the dynamics of gasoline prices and some other temporary factors.
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