Bank of Canada likely to delay interest rate hike

By Kay Rivera

As the Bank of Canada’s policy-setting meeting is fast approaching, more economists are convinced that interest rates will remain unchanged.

Out of 31 economists recently polled by Reuters, only one predicted a 25 basis point hike to 1.75% at for the interest rate decision on Wednesday. This was an insight quite surprising given that the economy is currently robust and is growing at its “fastest pace in a year in the second quarter.”

 “The Bank has incorporated a drag on economic growth from trade policy uncertainty that kept the level of GDP about half a point lower than it would otherwise have been by the end of 2020. To the extent that this uncertainty is lifted, a stronger forecast will be the result, and this can lead to a quicker pace of monetary tightening,” economists at TD noted.

“While progress on negotiations will be welcomed by Governor Poloz and company, we do not expect any significant change in the path of monetary policy or the communication thereof at this juncture.”

It can be recalled that the Bank of Canada has hiked rates twice this year (last January and May). This drove the policy rate to 1.50% from 1%.

“Most who have a view on the next rate rise say it will likely come at the Bank’s October meeting, while a handful of others say Governor Stephen Poloz and other policymakers won’t raise rates again until early 2019,” Reuters reported.

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