OTTAWA—In what might be a recent record for brevity by the Bank of Canada, its March 1 statement seemed to provide a counterpoint to every positive development in the economy and, not surprisingly, the overnight rate target was held at 0.50 percent.
As oil prices have stabilized, with West Texas Intermediate prices in the low US$50 per barrel range, a good argument can be made for the Canadian economy turning the corner. Economic growth, employment, and even inflation have shown signs of picking up, however international risks such as Brexit fallout, China’s economic transition, and uncertainty surrounding Trump’s policies remain.
“On balance, it’s steady as she goes,” said Oxford Economics senior economist Oren Klachkin in an email. He doesn’t think a rate cut, which was an option in January, is on the table anymore. “Having the ammo in the basket to support the economy in the case of a negative shock is for now the more pertinent concern for policymakers,” he added.
The Bank said the recent improvement in economic data for the Canadian and international economies is “consistent” with its projection, and it “remains attentive to the impact of significant uncertainties weighing on the outlook.” Gold, which tends to gain in value in times of uncertainty, has risen about 3 percent since the Bank’s Jan. 18 interest rate decision.
“We believe the positives outweigh the potential negatives at this point,” stated BMO in a Feb. 24 analysis.
