Bank of Canada holds interest rate at 1.5 per cent

The central bank kept its benchmark at 1.5 per cent, but data ‘reinforces’ view that more hikes are needed.

The Bank of Canada left its interest rate unchanged Wednesday in what could be just a brief pause along its gradual path to higher rates.

The central bank kept its benchmark at 1.5 per cent — but many experts have predicted it could introduce another increase as early as next month.

In a statement Wednesday, the Bank of Canada said more hikes should be expected thanks to encouraging numbers for business investment, exports and evidence that households are adjusting to pricier borrowing costs.

“Recent data reinforce governing council’s assessment that higher interest rates will be warranted to achieve the inflation target,” the bank said as it explained the factors around its decision.

“We will continue to take a gradual approach, guided by incoming data. In particular, the bank continues to gauge the economy’s reaction to higher interest rates.”

Bank of Canada governor Stephen Poloz has raised the rate four times since mid-2017 and his most-recent quarter-point increase came in July.

The bank can raise its overnight rate as a way to keep inflation from running too hot. Its target range for inflation is between one and three per cent.

The Bank of Canada said the economy has seen improvements in business investment and exports despite persistent uncertainty about the North American Free Trade Agreement and other trade policy developments. NAFTA’s year-long renegotiation, which resumes Wednesday in Washington, and other trade unknowns are under close watch by the bank.

The statement also pointed to other encouraging signs in Canada, including evidence the real estate market has begun to stabilize as households adjust to higher interest rates and new housing policies. Credit growth has moderated, the household debt-to-income ratio has started to move down and improvements in the job market and wages have helped support consumption, it said.

Heading into Wednesday’s rate decision, analysts widely expected Poloz to hold off on moving the rate — at least for now.

Last month, Poloz stressed the need to take a gradual approach to rate increases in times of uncertainty. He made the remarks during a panel appearance at the annual meeting of central bankers, academics and economists in Jackson Hole, Wyo.

“Taking a gradual, data-dependent approach to policy is an obvious form of risk management in the face of augmented uncertainty,” he said in his prepared remarks.

Related: Bank of Canada says Canadians owe $2 trillion as it mulls next rate hike

Related: Bank of Canada keeps key interest rate target on hold at 1.25 per cent

The Bank of Canada’s next rate announcement is scheduled for Oct. 24.

In its statement Wednesday, the bank also explained why it’s not going to raise the interest rate based on a recent inflation reading that showed the number had climbed to the top of its target range.

July’s unexpectedly high inflation number of three per cent was just a temporary spike in the data caused by airfare and gasoline prices, the bank said. It predicted inflation to edge back down towards two per cent in early 2019.

Core inflation, which omits volatile components such as pump prices, has remained firmly around two per cent, the bank noted.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Unique treasures to be found at Chilliwack Christmas Craft Market

The 44th annual event is the Chilliwack Community Arts Council’s largest fundraiser

Chilliwack toy drive brings in gifts, money to Ann Davis Transition Society

People dropped by Superstore to donate toys and more for those in need this holiday season

Seven Days in Chilliwack

A list of community events happening in Chilliwack from Nov. 18 to 24

Chilliwack RCMP find chemicals and cannabis extract in illicit lab

Marijuana may be legal but altering it using chemicals violates the Cannabis Act

Chilliwack RCMP seek suspects in rash of poppy donation box thefts

Incidents at four different locations in Sardis in the days leading up to Remembrance Day

REPLAY: B.C’s best video this week

In case you missed it, here’s a look at the replay-worth highlights from this week across the province

Privacy concerns over credit card use for legal online pot purchases

Worries follow privacy breaches at some Canadian cannabis retailers

Vancouver Police look for man in connection to ‘sexually motivated’ assault

Woman says man followed her into an apartment building

NEB approves operating pressure increase to repaired Enbridge pipeline

The pipeline burst outside of Prince George on Oct. 9, now operating at 85 per cent

B.C. VIEWS: Setting speed limits in a post-fact political environment

Media prefer ‘speed kills’ narrative, even when it fails to appear

Controversy erupts over Japanese flag in B.C. classroom

Online petition demanding removal has collected more than 5,700 signatures

Death toll rises to 76 in California fire with winds ahead

Nearly 1,300 people remain unaccounted for more than a week after the fire began

Trump says report on Khashoggi death expected in a few days

Jamal Khashoggi was a columnist for The Washington Post who was slain Oct. 2 inside the Saudi Consulate in Istanbul

Most Read