Bank of Canada expected to decide on interest rate hike today
The Bank of Canada is expected to hold its benchmark interest rate at 1.75 per cent today as it makes its first policy decision of 2019.
The central bank has been on a gradual rate-hiking trajectory for a year and a half, but after a series of disappointing developments, many experts are predicting it could be a while before the next increase.
Governor Stephen Poloz has raised the benchmark five times since the summer of 2017 and he’s instructed Canadians to prepare for an eventual era of three per cent interest rates.
But the slow climb back up from rock-bottom rates to the so-called neutral range, estimated by the bank to be between 2.5 and 3.5 per cent, could take longer than expected.
Canada has enjoyed a strong run, but experts have pointed to factors such as the economic fallout from a sharp drop in oil prices, weak wage and inflation pressures, and lingering global trade uncertainty as key reasons why there’s no rate-hike urgency.
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Analysts will scrutinize Poloz’s words today for clues on what pieces of information the bank will focus on moving forward.
In explaining its decision last month to leave the rate untouched, the Bank of Canada said the timing of upcoming rate increases would depend on factors such as the extent of the crude-price slump, the ability of corporate investment to pick up its pace and how much room the overall economy still has left to grow without stoking inflation.
A day after the rate announcement, Poloz said “the current level of interest rates remains appropriate for the time being” and that the pace of future hikes would be data dependent.
On Wednesday, the Bank of Canada will also provide its updated quarterly projections in its latest monetary policy report.
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