Economy

Bank of Canada makes its latest interest rate announcement

Bank of Canada makes its latest interest rate announcement

Wide Canadian banks, on the other hand, possess to fear about more than neatly suited the hobby-rate moves of the Financial institution of Canada. Still, the emphasis on trade risks is prompting some questions about the central bank's confidence in the country's rebound. It underscored, in particular, how the impacts of the U.S. If every country in the world were to impose 25 per cent levies on imported goods, the USA economy would take a long-run hit of 1.1 per cent, compared to 3.1 per cent for Canada and 2.8 per cent for Mexico.

Canadian lenders have offered guidance in the current environment that net interest margins will expand around one to two basis points per quarter, Colangelo said, which would change if there was a rate cut. Stocks are also paring gains. But their tone suggests a cut is more likely than an increase. "The Bank of Canada still believes policy is still supporting expansion".

In testimony today to US lawmakers, Federal Reserve Chairman Jerome Powell seems to have pushed the central bank closer to cutting interest rates this month by saying the economy continues to face downside risks including the U.S.

Yet in an all-out trade war in which every country in the world were to impose 25 per cent levies on imported goods, the Canadian economy would be 6 per cent smaller relative to the base case, with the global economy taking a 3 per cent hit.

After Canada's expansion stalled at the end of previous year, growth is returning to potential, with much of the newly created economic slack largely centered in energy producing regions, policy makers said.

"Following temporary weakness in late 2018 and early 2019, Canada's economy is returning to growth around potential, as expected", reads a statement from the bank, which credited "stronger than predicted" growth in spring partly to the "reversal of weather-related slowdowns...and a surge in oil production".

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In its April outlook, the bank predicted relatively weak growth of 1.3 per cent in the second quarter. The Bank of Canada cut its forecast for economic growth next year to 1.9 per cent from 2.1 per cent, a decent-but-unspectacular pace that won't generate much inflation pressure. "Canada is still somewhat optimistic that growth will pick up in Q2... though they're still concerned about trade tensions, a slowing global economy".

It's the third time in 2019 that the interest rate has held steady at 1.75% after the Canadian economy showed signs of returning to potential growth. Overall, the statement emphasises that the BoC will remain on the side-lines with the outlook largely determined by the outcome of the US-China trade wars. Escalation of trade conflicts remains the biggest downside risk to the global and Canadian outlooks.

The Bank of Canada, which was widely expected to stand pat Wednesday, said it will continue to monitor data ahead of future decisions with a particular focus on developments in the energy sector and the effects of global trade tensions.

"Escalating trade conflicts, geopolitical tensions and related uncertainty are contributing to the broad-based slowdown of global economic activity", the bank said in its report.

The Canadian economy grew by 1.9 per cent in 2018 and 3 per cent in 2017.