The Bank of Canada left its target for the overnight rate unchanged at 1.75 percent this morning. In the statement accompanying the decision the Bank noted that although ongoing global trade tensions are having a negative effect on the global economy, economic growth in Canada is improving. A decline in mortgage rates is helping to stabilize housing markets still challenged by the mortgage stress test and a healthy labour market is supporting consumption growth.  The bank judges the current level of its policy rate appropriate but emphasized that it will be closely monitoring developments in the energy sector and the impact of trade conflicts.

The Canadian economy is showing signs of recovery after two consecutive quarters of sub-1 percent growth. We are currently tracking second quarter real GDP growth at close to 3 percent while Canadian inflation has recently bumped up above the Bank’s 2 percent target. As long as those trends hold, a rate cut by the Bank of Canada is looking less and less likely, though there may be some pressure to follow the Federal Reserve should it choose to ease monetary policy.

Copyright BCREA – reprinted with permission