Bank of Canada holds interest rate at 1.5 per cent

The central bank kept its benchmark at 1.5 per cent, but data ‘reinforces’ view that more hikes are needed.

The Bank of Canada left its interest rate unchanged Wednesday in what could be just a brief pause along its gradual path to higher rates.

The central bank kept its benchmark at 1.5 per cent — but many experts have predicted it could introduce another increase as early as next month.

In a statement Wednesday, the Bank of Canada said more hikes should be expected thanks to encouraging numbers for business investment, exports and evidence that households are adjusting to pricier borrowing costs.

“Recent data reinforce governing council’s assessment that higher interest rates will be warranted to achieve the inflation target,” the bank said as it explained the factors around its decision.

“We will continue to take a gradual approach, guided by incoming data. In particular, the bank continues to gauge the economy’s reaction to higher interest rates.”

Bank of Canada governor Stephen Poloz has raised the rate four times since mid-2017 and his most-recent quarter-point increase came in July.

The bank can raise its overnight rate as a way to keep inflation from running too hot. Its target range for inflation is between one and three per cent.

The Bank of Canada said the economy has seen improvements in business investment and exports despite persistent uncertainty about the North American Free Trade Agreement and other trade policy developments. NAFTA’s year-long renegotiation, which resumes Wednesday in Washington, and other trade unknowns are under close watch by the bank.

The statement also pointed to other encouraging signs in Canada, including evidence the real estate market has begun to stabilize as households adjust to higher interest rates and new housing policies. Credit growth has moderated, the household debt-to-income ratio has started to move down and improvements in the job market and wages have helped support consumption, it said.

Heading into Wednesday’s rate decision, analysts widely expected Poloz to hold off on moving the rate — at least for now.

Last month, Poloz stressed the need to take a gradual approach to rate increases in times of uncertainty. He made the remarks during a panel appearance at the annual meeting of central bankers, academics and economists in Jackson Hole, Wyo.

“Taking a gradual, data-dependent approach to policy is an obvious form of risk management in the face of augmented uncertainty,” he said in his prepared remarks.

Related: Bank of Canada says Canadians owe $2 trillion as it mulls next rate hike

Related: Bank of Canada keeps key interest rate target on hold at 1.25 per cent

The Bank of Canada’s next rate announcement is scheduled for Oct. 24.

In its statement Wednesday, the bank also explained why it’s not going to raise the interest rate based on a recent inflation reading that showed the number had climbed to the top of its target range.

July’s unexpectedly high inflation number of three per cent was just a temporary spike in the data caused by airfare and gasoline prices, the bank said. It predicted inflation to edge back down towards two per cent in early 2019.

Core inflation, which omits volatile components such as pump prices, has remained firmly around two per cent, the bank noted.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

Friends of ‘Mac’ rally to fund young family left behind by former martial arts teacher in Surrey

‘He’s well loved,’ says operator of Fraser Heights academy where Mackenzie MacWilliams studied, worked

Surrey burglar loses appeal on Hook & Ladder break-in conviction

The case centred on a Jan. 3, 2016 break-in at the Newton pub

Police food drive to help feed North Delta kids

Donations collected will go support the Rotary Club’s Starfish Pack program

Seven years after daughter’s death, grieving mother issues new appeal for answers

Ashley Chauvin’s body was found near South Surrey’s Nicomekl River in July 2012

Bus driver assault in Vancouver once again raises safety concerns

A 49-year-old Surrey man was released on a promise to appear in court. No charge has been laid

Canada privacy watchdog taking Facebook to court

If the court application is successful, it could lead to modest fines and an order for Facebook to revamp its privacy

One million recyclable bottles “lost” daily in B.C., foundation says

387 million beverage containers didn’t make it back into the province’s regulated deposit refund system in 2017

VIDEO: B.C.’s waving granny gets incredible send-off from school kids

Tinney Davidson has been waving at students on their way to school for over 11 years, but is moving in a month

Struggling B.C. adoption agency elects new board that intends to keep it open

The previous board announced that Choices would close May 31

Woman, 60, charged in connection to thefts at YVR

RCMP believe the foreign national is part of a larger organized theft group

Vancouver man, 19, charged in human trafficking case involving teen girl

The 16-year-old girl was reported missing and later discovered in Vancouver

Worst 10 bus routes in Metro Vancouver for rider complaints

TransLink releases list, with Route 319 at the top

VIDEO: Highway One to be widened east to 264th Street in Fraser Valley

The $235 million project includes upgrades to overpasses and a rail bridge

Most Read