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

Support for ‘Plywood bylaw’ at Langley Township public hearing

Regulation would require polycarbonate in place of plywood to board up buildings in Fort Langley

Vancouver Giants earn a weekend sweep against Everett

Langley-based hockey team plays its next game is at home on Friday, Sept. 28, against Seattle.

VIDEO: Driving from Langley to Whistler to help firefighters

Second annual rally for Porsche fans draws increased turnout

VIDEO: Multiple power outages in Langley

Traffic accidents among the causes

Environment Canada confirms Ottawa area hit by two tornadoes Friday

At one point more than 200,000 hydro customers were blacked out

Coaches, players on Alberta university rugby team buckle up for the Broncos

16 people died when Humboldt Broncos bus collided with a semi-truck in rural Saskatchewan

The Vatican ‘owes God an apology,’ activist says in letter to Pope Francis

Letter came after a report on sexual abuse of more than 1,000 children in six Pennsylvania dioceses

Newcomers vying to fill power void in Vancouver’s ‘weird’ election race: expert

A proliferation of new parties and independent candidates are crowding the Vancouver race

Lions earn stunning 35-32 OT win over Ticats

Epic comeback lifts B.C. past Hamilton in CFL thriller

Czarnik nets 3 as Flames dump Canucks 5-2

Calgary picks up exhibition win over Vancouver

Ottawa to name new ambassador for women, peace and security, Freeland says

Chrystia Freeland also confirmed Canada would spend about $25 million to fund number of initiatives

‘A little bright spot:’ Ottawa residents rescue dog trapped beneath rubble

Freelance journalist says rescue of a dog trapped under rubble was happy ending amid chaos in Ottawa

Most Read