Canada’s central bank says it expects the economy to pickup after a recent slowdown
(GEOFF ROBINS)

Ottawa (AFP) – Canada’s central bank on Wednesday maintained its key lending rate at 1.75 percent, saying it expects the local economy to pick up after a recent slowdown despite heightened uncertainty over trade with China.

The move was in line with the expectations of economists and the Bank of Canada’s view that the slowdown in late 2018 and early 2019 was temporary.

“For central bankers, like doctors, the paramount objective is to ‘do no harm,’ and there’s still enough uncertainty for the Bank of Canada to stand pat on interest rates,” CIBC analyst Avery Shenfeld said in research note.

“Overall, the bank’s statement doesn’t explicitly warn of rate hikes to come (that remains data dependent), but has an optimistic tone about what lies ahead, leaving the impression that the bank sees the next move as a hike, if well down the road.”

The bank pointed to strong job growth, consumer spending and exports, as well as signs the oil sector is beginning to recover.

It added that core inflation remains close to 2.0 percent — in line with its projections — and is expected to remain so over the coming months.

But “the recent escalation of trade conflicts is heightening uncertainty about economic prospects,” it said in a statement. “In addition, trade restrictions introduced by China are having direct effects on Canadian exports.”

In contrast, the removal this month of US tariffs on Canadian and Mexican steel and aluminum imports as well as the prospect of soon ratifying a new continental trade deal is expected to have “positive implications for Canadian exports and investment,” it added.

The USMCA treaty — which replaces the 25-year-old North American Free Trade Agreement (NAFTA) — could be ratified by the end of July, Canada’s ambassador to Washington David MacNaughhton said this week.

It was signed last year after months of trilateral negotiations, but Canada and Mexico had held up its ratification until the US removed the steel and aluminum tariffs.

Ottawa took a first step on Tuesday toward approving the USMCA with the passage of a ways and means motion to introduce an act to implement the treaty.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.