Bank of Canada leaves interest rates intact

Bank of Canada leaves interest rates intact

On Wednesday, Canada’s key financial institution decided not to change its benchmark interest rate against the backdrop of signs that the current trade conflict between China and the United States had an adverse impact on both global demand as well as commodity prices.

As anticipated, the Bank of Canada announced it was holding its overnight cash rate on hold at 1.75%.

The major bank cited predictions that the global economic expansion was anticipated to soften to 3.4% in 2019 from last year’s reading of 3.7% and pointed to a sudden deceleration to a more sustainable tempo for the American economy.

The bank stressed that there are soaring signs that the US-China trade clash is putting pressure on global demand as well as commodity prices.

In its monetary policy statement, Canada’s major bank cut its forecast for surge in the national economy to 1.7% this year in contrast with the previous year’s outcome of 2.1%, blaming the recent tumble in crude prices.

The major bank also stressed that inflation would probably stay below 2% for much of this year because of lower gasoline prices.

Taking into account all of these factors, Governing Council keeps judging that the policy interest rate should be lifted over time into a neutral range for the purpose of achieving the inflation objective, as the Bank of Canada pointed out.

Market experts had widely anticipated that the Canadian primary financial institution would stand pat, considering slumping crude prices as well as easing wage inflation. However, they still foresee extra two rate lifts for this year.

With core inflation measures still sticking with the 2% objective and also unemployment at a 40-year minimum, they still expect at least two extra Bank of Canada rate lifts this year, as some financial analysts pointed out.

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Market updates on August 15

The risk sentiment remains under pressure after the comments by China about the countermeasures against the US tariffs. Thus, the AUD/USD and the USD/JPY pairs will be under our attention.

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