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

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

A for sale sign is shown in by new homes in Beckwith, Ont., just outside Ottawa, on Wednesday, Jan. 11, 2018. THE CANADIAN PRESS/Sean Kilpatrick
Thompson-Okanagan population grew despite COVID-19: report

The Chartered Professional Accountants of BC said there are 8,462 new residents in the region

File photo
Princeton mayor ready to support referendum if proposal for $7 million loan gets defeated

A proposal to borrow $7 million to fix town infrastructure may well… Continue reading

Directors and alternate directors at the Regional District of Okanagan-Similkameen received nearly $560,000 in remuneration and expenses in 2020, according to the Statement of Financial Information. (Black Press file photo)
Almost $560,000 in remuneration for Regional District of Okanagan-Similkameen board

Costs of directors and alternate directors outlined in Statement of Financial Information

(File photo)
$8M in wages for Regional District of Okanagan-Similkameen staff

34 employees paid more than $75,000 in 2020

Glen Lennon now resides in a neat and fully serviced unit in the Silver Crest Retirement Home, managed by Princeton and District Community Social Services. Photo Andrea DeMeer
Princeton RCMP and social workers find new home for elderly accident victim

“I love the sun and the sun shines on my patio here. I can go out and walk around.”

People watch a car burn during a riot following game 7 of the NHL Stanley Cup final in downtown Vancouver, B.C., in this June 15, 2011 photo. THE CANADIAN PRESS/Geoff Howe
10 years ago: Where were you during the 2011 Vancouver Stanley Cup Riots?

Smashed-in storefronts, looting, garbage can fires and overturned cars some of the damage remembered today

Vernon-Monashee NDP MLA Harwinder Sandhu supported a motion in the B.C. legislature for Canada to create a national Indigenous History month Monday, June 13, 2021. (Contributed)
Canada needs a national Indigenous History Month, Vernon MLA agrees

Harwinder Sandhu supports motion to recognize June as month to advance reconciliation efforts with First Nations

(Facebook)
New trial date set for Penticton beach attacker’s triple assault charges

May trial was delayed after Crown witnesses failed to show up

Orange ribbons are tied to the fence outside Vernon’s Gateway Homeless Shelter on 33rd Street. (Jennifer Smith - Morning Star)
POLL: Low-key Canada Day in the works for Vernon

Councillor calling for Indigenous recognition for 2022

A conceptual design of Vernon’s new Active Living Centre, which will go to referendum Oct. 15, 2022. (Rendering)
Active living centre 2022 referendum planned in Vernon

City hoping to get Coldstream and Areas B and C back on board

Closure of the 2900 block of 30th Avenue will allow restaurants and other businesses to extend their patios onto the street. (Jennifer Smith - Morning Star)
Green light given to downtown Vernon road closure

Single block of 30th Avenue to close over summer months to boost business

Graduating Grade 12 student Savannah Lamb has been awarded an approximate $40,000 scholarship from the Beedie Luminaries foundation. (Contributed)
Dedicated Salmon Arm student earns scholarship to pursue post-secondary education

Savannah Lamb is graduating from Salmon Arm Secondary with a $40,000 scholarship

A provided photo of the suspect. (Kelowna RCMP/Contributed)
Kelowna RCMP investigating after business robbed

An undisclosed amount of money and merchandise were taken from the business

Most Read