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Trade ‘front and centre’ in Bank of Canada’s call to hold interest rate

Trade ‘front and centre’ in Bank of Canada’s call to hold interest rate

The unknown consequences of ongoing trade tensions were “front and centre” in the Bank of Canada’s decision this week to leave its key interest rate unchanged, a top Bank of Canada official said Thursday.

In a speech one day after the rate announcement, senior deputy governor Carolyn Wilkins acknowledged it’s difficult for the central bank to estimate the “highly uncertain” economic implications from tit-for-tat tariffs between Canada and the U.S., and the resulting blow to business confidence.

“The implications of the current trade environment were front and centre,” Wilkins told the Saskatchewan Trade & Export Partnership as she provided a sense of the deliberations behind the interest rate decision.

“The trade environment… has been top of mind for some time given its importance to economic prospects here at home and abroad. And, while Canadian officials have been working hard to resolve the issues, a lot of uncertainty remains.”

The Bank of Canada held its trend-setting interest rate at 1.5 per cent Wednesday. It made a quarter-point increase at its July policy meeting and has hiked it a total of four times since mid-2017.

With Canada’s economy operating close to full tilt, many experts predict bank governor Stephen Poloz to raise the rate again at the Oct. 24 meeting.