TORONTO — The Bank of Canada maintained its key overnight interest rate at 1.75 per cent as expected on Wednesday but said the escalating U.S.-China trade war was doing more damage to the global economy than it had forecast in July.
What the economists and analysts say about the bank’s next move:
Josh Nye, RBC senior economist
“A bit more neutral than expected, not too much change in terms of guidance … they do, though, say that they are going to be updating their economic projections and paying particularly close attention to global developments.”
“Certainly looking right now like the Bank of Canada is perhaps a bit less inclined to lower rates in the near term than markets have been implying.”
Andrew Kelvin, TD Securities, chief Canada strategist
The BoC statement “is a little bit less dovish than markets had been set up for. The bank is hitting all the same points it did in July. The global trade conflict is hurting global growth, but the key is that they did not materially change their forward looking language, saying the current level of stimulus remains appropriate. They are playing this very close to the chest so that they keep all their options open. We’re still looking for a rate cut in January 2020.”
Douglas Porter, BMO chief economist
“On balance, the remarks are still in tune with our revised call of a 25 bp rate trim at the October 30 meeting, but the Bank is not committing to anything. Policymakers have another eight full weeks before the next decision, including two full months of jobs and CPI releases, and (likely) another Fed rate cut, and even a Federal election in the meantime. Clearly, much will ultimately depend heavily on how the US/China trade war plays out; but, given that we are not optimistic on that front, we lean to a rate cut in late October.”
Simon Harvey, FX market analyst for Monex Europe and Monex Canada
“They are waiting for the data to materialize. Downside risks have worsened somewhat but they are not going to pigeon hole themselves into signalling a cut in the October or December meeting, while at the same time monetary policy still remains accommodative. This time around, without the press conference, they didn’t dial down the hawkish remnants.”
© Thomson Reuters 2019
