Bank of Canada keeps key interest rate target on hold at 0.25 per cent

Bank of Canada keeps key interest rate target on hold at 0.25 per cent, citing low unemployment and strength in economy Canada’s central bank stands pat after two rate hikes this year. Photograph: Nicolas Misculin/Reuters

Bank of Canada kept its key interest rate target on hold on Thursday, a month after its first hike since 2010, as a newly ratified US-Mexico trade deal dampened investment optimism in Canada.

The central bank held its key overnight interest rate target at 0.25 percent, as expected by analysts. The statement, the central bank’s last before its next scheduled announcement on 25 November, said it continues to expect “gradual” rate increases.

The Bank of Canada lifted rates twice in 2018 after taking a break from hiking since 2010.

“Approaching the end of a synchronized global recovery, there is considerable uncertainty about potential developments abroad, in particular what may unfold following the adoption of new trade agreements in North America,” the central bank said in its rate decision statement.

Canada is highly integrated with the United States through its trade ties, and the inclusion of tariffs in US-Mexico relations under Donald Trump has hit Canadian manufacturers hard.

The Bank of Canada recently said about 4,000 manufacturing jobs were lost in September alone due to the US-Mexico trade deal.

On Wednesday, the Organization for Economic Co-operation and Development lowered its global growth forecasts for 2018 and 2019 but said the global economy would keep gaining momentum thanks to stimulus programs in several countries.

The OECD forecast annual global growth of 3.9 percent this year and next. The Bank of Canada earlier this year was more pessimistic, predicting 2018 and 2019 growth of 3.5 percent and 3.1 percent, respectively.

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