Bank of Canada makes September rate decision

The Bank of Canada (BoC) has elected to hold its policy interest rate steady at 2.25 per cent today amid a high degree of uncertainty about the Canadian economy. 

The decision follows the release of very positive GDP growth data from Q2, in which the Canadian economy grew at an annualized rate of 3.3 per cent. However, the recent breakdown in trade negotiations with the United States and continued inflation spikes due to high energy prices appear to be weighing on economic outlooks for the country. 

"The continuing conflict in the Middle East is keeping energy prices high. As well, new US tariffs and Canadian counter-measures have been announced following the breakdown of trade talks between Canada and the United States. Both situations remain fluid," a press release announcing the decision reads. "Overall, recent data reaffirm Governing Council’s view of a broadening recovery in Canada’s economy. However, uncertainty is high and new US tariffs and threats of further action pose risks to the sustainability of the recovery."

July's consumer price index (CPI) print showed an annualized inflation rate of three per cent, but much of that rise can be attributed to high energy prices. In addition to strong GDP growth in Q2, the most recent Labour Force Survey showed an increase of 75,000 jobs in July with unemployment falling to 6.4 per cent, its lowest level in two years. 

"With the economy and inflation evolving broadly as forecast in the July [Monetary Policy Report], Governing Council agreed to leave the policy rate unchanged," the release reads. "However, the upside risks to inflation have increased, while new tariffs make growth prospects more uncertain. Governing Council will assess the sustainability of the economic rebound and the outlook for inflation, and is prepared to adjust monetary policy as needed. The Bank remains committed to maintaining Canadians’ confidence in price stability through this period of global upheaval."