Published: Thu, April 13, 2017
Money | By Oscar Reynolds

Bank of Canada holds rate at 0.5%, doubts recent strong growth sustainable

Bank of Canada holds rate at 0.5%, doubts recent strong growth sustainable

The Bank of Canada held rates once again at 0.5% on Wednesday, as expected.

In January, he said the unknowns surrounding the US trade agenda, along with what was then the sluggish state of the Canadian economy, had left the door open to a possible rate cut.

"While there's no fundamental story that we could tell to justify that kind of inflation rate in housing prices, it's that gap between what fundamentals could manage to explain and what is actually happening, which suggests that there's a growing role for speculation in that, " Poloz said in Ottawa. "It's much nicer than having serial disappointment to report on".

The central bank announced it was keeping the rate at 0.5 per cent against the backdrop of potential risks associated with the upcoming economic policies from the U.S.

It also said the economy has yet to show it can stick to the higher growth trajectory.

However, the bank also says export growth has been uneven and there have been continued signs of weakness in business investment and employment indicators of hours worked and wages.

Still, Cieszynski said markets don't believe the bank will hike rates until 2018, even if the Canadian economy continues to improve and the USA follows its anticipated schedule of rate increases.

"We've seen some data do a little bit better", Donald said.

"The headline suggests the bank is taking a positive outlook on the Canadian economy, but I think a deeper read on this suggests not an very bad lot is going to change here. They want to see more sustainable investment, sustainable exports and they want to see removal of uncertainty from the United States".

Beyond 2017, the bank predicted growth will moderate and become more balanced.

Canadian dollar ends at C$1.3273, or 75.34 U.S. cents * Loonie touches its strongest since February 28 at C$1.3238 * Bond prices higher across a flatter yield curve (Adds portfolio manager quotes and details on Trump's comments and updates prices) By Fergal Smith TORONTO, April 12 (Reuters) - The Canadian dollar strengthened on Wednesday to a six-week high against its U.S. counterpart after the Bank of Canada turned less dovish, while comments by U.S. President Donald Trump weighed on the greenback.

For this year, however, the bank believes hot housing markets in cities like Toronto will help residential investment deliver a "significantly higher" contribution to Canada's growth performance than it had anticipated in January.

The future, however, looks murky. As a result, the central bank lowered its estimate for 2018 growth to 1.9 per cent. The central bank had flirted with the idea in January when there was high uncertainty and concern surrounding the USA trade agenda and Canada's economy.

Changes under discussion in the US include the renegotiation of the North American Free Trade Agreement, corporate and personal tax cuts, regulatory easing and a potential border tariff.

Due to an expected additional drag on global investment connected to US trade policy uncertainty, the report included slightly lower projections for export growth in 2017 and 2018 compared to the bank's earlier predictions.

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