Bank of Canada maintains key lending rate at 0.5%

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OTTAWA: Canada’s central bank maintained its key lending rate at 0.5 percent on Wednesday, saying it remains worried about “significant uncertainties” going forward despite a surprise uptick in the economy.

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There is “improving growth” in both the global and Canadian economies, the Bank of Canada said.

It noted that there may have been “slightly stronger than expected” headway in Canada’s housing and domestic consumption in the fourth quarter.

Those figures are due to be released on Thursday. Analysts are forecasting two percent annual growth after a 3.5 percent jump in the previous quarter.

But, the bank added, there are still “significant uncertainties weighing on the outlook,” in part stemming from upcoming changes expected from the US administration of President Donald Trump, including what he has said would be a “tweak” in the Canada-US trade relationship.

The interest rate has remained unchanged since July 2015.

The bank justified its decision to keep the rate at the near-historic low, saying there is “persistent economic slack in Canada, in contrast to the United States.”

There has been increasingly positive data on the Canadian economy in recent months, with strong job creation, an improving trade balance and a small rise in inflation due to higher energy costs in some provinces related to the introduction of carbon pricing schemes.

The bank however said there is continued “subdued growth in wages and hours worked.” Exports also face “ongoing competitiveness challenges,” it added.

In the current context, CIBC economist Nick Exarhos predicted the bank would not raise rates until next year. AFP

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