4 December 2019

This week, the trade wars have weakened slightly, when the Governing Council finished its latest round of deliberations. However, the previous 48 hours were intense, as Donald Trump’s administration has threatened France, Brazil and Argentina with new tariffs, and the U.S. president noted the agreement with China may not be signed at all. Such news led to a new wave of uncertainty and a drop at the stock markets.

“The current trade conflicts and related uncertainty keep affecting the global economic activity, and are still the main sources of risk,” – the BoC says.

Nevertheless, the Bank seems to be pleasantly surprised by the economy’s resilience for now.

In Q3, gross domestic product showed an annual increase by 1.3%, which is not so impressive, but still coincides with the central bank’s forecasts. The consumer spending and real estate are still the largest sources of “strength.”

The policymakers keep watching the financial vulnerabilities related to the household sector closely. This way the BoC shows concerns on the high household debt level. Over the previous few years, credit growth showed the fastest pace, which means Canadians will borrow as much as they are allowed by banks.

The activity rebound was caused by lower mortgage rates, which went down as the U.S. Federal Reserve reduced borrowing costs in summer. The BoC will avoid adding stimulus for as long as possible.

The next interest rate meeting is scheduled for 22nd.