29 May 2019

“In general, the latest data are proving our opinion that the slowdown in late 2018 and early 2019 was temporary, while the global trade risks have grown,” – the BoC noted. “So the current interest rate policy is still appropriate.”

TD Bank economist Brian DePratto says the trade issue is the largest difficulty for the Bank.

“Although we’ve seen some improvements, e.g. the end of steel and aluminum tariffs, other trade conflicts are still affecting the economic outlook,” – he believes. “From this perspective, a neutral stance is quite appropriate.”

Usually, the BoC raises its key lending rate when it’s necessary to cool down the overheating economy and restrain inflation. The reduction is used for stimulating the economy and motivating people to borrow and spend more.

The central bank makes its rate decision based on numerous indicators, including the jobs market performance, monthly GDP data, imports and exports volume.

Before today’s meeting, traders gave a less than 10% chance of a rate increase.

Meanwhile, the market expects a 50% of a rate cut by October.

The BoC’s next rate meeting will be on July 10.