Bank of Canada resists pressure to cut its interest rate — for now

Bank of Canada resists pressure to cut its interest rate — for now

Canada's central bank has decided to keep its benchmark rate at 1.75 per cent, despite "escalating trade conflicts" that are starting to take a toll on the country's economy.

The Bank of Canada said Wednesday it has elected to neither raise nor lower its benchmark rate, judging the economy to be growing at a healthy clip despite uncertainty over international trade.

Exports are growing, the housing market is showing signs of a rebound, and wages are picking up, the bank noted. On the flip side, business investment is weakening because of the trade war, which is why the bank thinks the economy will slow down in the second half of this year.

That's a recipe to keep rates right where they are — for now.

"Canada's economy is operating close to potential and inflation is on target," the bank said. "However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies."

"In this context, the current degree of monetary policy stimulus remains appropriate."

Prior to the decision, traders thought there was a slight chance of a rate cut. Now that the bank has said it will stand pat for now, however, investors are pricing in about a two-thirds chance of a rate cut next month