At today’s policy rate decision meeting, the Bank of Canada (BoC) decided to hold its policy rate at 1.75%. The BoC has held the rate at 1.75% since October 2018. The Central Bank indicated, however, that some key economic indicators have softened despite a resilient economy. Specifically, there has been weaker business investments and a decline in consumer confidence and spending. The Central Bank noted that if conditions support a rate reduction, they are open to cutting the rate to support the economy but noted that the current conditions may only be temporary. They also indicated that the risks associated with the trade wars have decreased with the recent signing of the US-China Phase 1 agreement. All these factors considered, the BoC forecasts a fourth-quarter 2019 growth rate of 0.3% and Q1 2020 growth of 1.3%.
The Canadian Central Bank has resisted reducing the policy rate for more than a year while most central banks around the world have reduced their policy rate to boost con-sumer spending amid a slowing global economy. However, we believe that if economic conditions in Canada worsens, they will likely cut rates at the next policy meeting to be held on March 4, 2020.