Bank of Canada holds rate steady, notes 'increased uncertainty' about future hikes

Bank of Canada holds rate steady, notes 'increased uncertainty' about future hikes

Together, the downward revisions worked to muddy the rate hike path and the bank noted the change saying there is "increased uncertainty about the timing of future rate increases".

"Although we figured the economy was in for a detour at the end of a year ago, that detour may wind up being longer than we had expected", she said in the speech, which was to be delivered to the Hamilton Chamber of Commerce.

However, in an accompanying statement, the bank expressed considerable doubts about the timing of future increases and warned the first half of 2019 is on track to post weaker-than-expected results.

A benign interest rate environment in light of the central bank's decision Wednesday is supportive for those sectors, says Anish Chopra, managing director with Portfolio Management Corp.

"Given the mixed picture that the data present, it will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook", said the statement, which explained some of the factors behind the decision.

Consumer spending and the housing market were soft despite strong growth in employment and labor income, with exports and business investment falling short of expectations, it added. Before Wednesday's interest rate decision, the market had been pricing in a small chance of a hike.

Many analysts don't expect the central bank to raise the benchmark until at least late 2019 - and some have started to suggest a rate cut could arrive before the next increase.

The Canadian dollar weakened to its lowest in more than two months against the greenback on Thursday following a speech from a deputy governor of the Bank of Canada, as investors raised bets that the central bank may cut interest rates this year.

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But policy-makers were caught off guard when last Friday's Statistics Canada report showed a sudden deceleration in the fourth quarter for other categories as well, Patterson said. TD securities notes the latter has seen double-digit annualized declines in two straight quarters.

When asked if the central bank was anxious those rules would push unqualified buyers to seek loans on the secondary mortgage market, Patterson said it was to be watched and would be a concern "if that part of the market becomes too large".

Nevertheless, the bank said it appears the economy will be weaker in the first half of 2019 than anticipated in January when it published its most recent set of quarterly projections.

The Canadian dollar swooned on the news, falling almost half a cent minutes following the bank's announcement.

On the inflation front, the Bank appears to have slightly downgraded its forecast, now expecting inflation to stay below its 2% target this year reflecting energy price impacts and a softer economic backdrop.

"It is clear that global economic prospects would be buoyed by the resolution of trade conflicts", said the bank.

The price of West Texas Intermediate fell slightly as USA fuel stockpiles dropped during the week to offset an increase of 7.1 million barrels of crude inventories.