The Bank of Canada building is pictured in Ottawa on September 6, 2011. The Bank of Canada is defending itself amid questions about its public silence ahead of an interest-rate increase last week that caught many analysts by surprise. File photo by THE CANADIAN PRESS

Bank of Canada holds interest rate at 1%

Bank of Canada holds rate but sends fresh signals that hikes are on the horizon

The Bank of Canada stuck with its trend-setting interest rate Wednesday, but it offered fresh, yet cautious, warnings to Canadians that increases are likely on the way.

The central bank has now left the rate locked at one per cent for two straight policy announcements after the strengthening economy prompted it to raise it twice in the summer.

In announcing the decision, the bank pointed to several recent positives that could support higher rates in the coming months. They included encouraging job and wage growth, sturdy business investment and the resilience of consumer spending despite higher borrowing costs and Canadians’ heavy debt loads.

On top of that, there’s increasing evidence in the economic data that the benefits from government infrastructure investments have begun to work their way through the economy, the bank said.

But on the other hand, the bank noted exports have slipped more than expected in recent months after a powerful start to the year, although it continues to predict trade growth to pick up due to rising foreign demand.

It also said the international outlook continues to face considerable uncertainty mostly because of geopolitical- and trade-related factors.

“While higher interest rates will likely be required over time, (the bank’s) governing council will continue to be cautious,” the bank said in a statement Wednesday that accompanied its decision.

It will be “guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity and the dynamics of both wage growth and inflation.”

The bank said inflation, a key factor in its rate decisions, has been slightly higher than anticipated and could stay that way in the short term because of temporary factors like stronger gasoline prices. Core inflation, which measures underlying inflation by omitting volatile items like gas, has continued to inch upwards.

Governor Stephen Poloz raised rates in July and September in response to an impressive economic run that began in late 2016. The hikes took back the two rate cuts he introduced in 2015 to help cushion, and stimulate, the economy from the collapse in oil prices.

From here, the bank must assess how to proceed with the interest rate while taking into consideration that Canadian households have amassed high levels of debt and the presence of still-hot housing markets in areas like Toronto and Vancouver.

Last month, the Bank of Canada flagged the steady climb of household debt and these real estate markets as the financial system’s top vulnerabilities.

The bank’s statement Wednesday said recent economic indicators have been in line with its October forecast, which projected a moderation following the country’s exceptional growth in the first half of 2017.

The document contained a few differences compared with the statement that accompanied its last rate announcement in October.

This time, the bank once again noted the unknowns over the future of trade policy, however, it did not specifically mention the ongoing renegotiation of the North American Free Trade Agreement.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Kim’s Angels return to fill ambulance for needy in Langley

The annual charity will see donors pack an ambulance with food, clothing, and baby supplies.

Christmas cheer for 400 in Aldergrove

Shortreed Elementary School hosts breakfast with Santa

SkyTrain timeline to Langley City uncertain

Plans are firming up for a SkyTrain link, but not an arrival date.

Canadian Museum of Flight volunteer was there from the beginning

Fond memories as the Langley aviation history exhibition readies for the holidays

Star Calendar

Upcoming events and activities in the Aldergrove area

Abbotsford Falcons win Gold at 2018 BC Football Championship

Falcons won 12 straight season games including the provincial title

Man charged with attempted murder in Chilliwack River Valley deemed mentally unfit

Father says son has schizophrenia; Law professor say too many with mental illness in jail

Lawyer for Chinese exec detained by Canada says it’s ‘inconceivable’ she would flee

Meng Wanzhou was detained at the request of the U.S. during a layover at the Vancouver airport

Omar Khadr to ask for Canadian passport to travel, permission to speak to sister

He spent years in U.S. detention at Guantanamo Bay after he was caught when he was 15

One of Tori Stafford’s killers transferred to medium-security prison

Michael Rafferty was sentenced to life in prison in 2012 in the kidnapping, sexual assault and first-degree murder of Tori Stafford

Aldergrove Totems fall in heart-breaker

Visiting Haney boys win varsity basketball season home opener

‘Abhorrent’ condition of autistic B.C. boy shows flaws in care system: report

‘Charlie’ was underweight and ‘covered in feces’ when he was removed from his mom’s care

Most Read