Bank of Canada Rate Decision: 2.25% (Forecast 2.25%, Previous 2.25%)
- The Bank of Canada held interest rates steady, saying keeping borrowing costs at their current level is still appropriate to mitigate the trade war damage.
- The economy appears to be more resilient than previously thought, but still sees ongoing economic slack keeping inflation close to the bank's 2% target.
- The bank reiterated that the current policy rate is at about the right level and 'now is prepared to respond if the outlook changes'
According to the Bank of Canada, current conditions still help limit the damage caused by the trade war with the United States.
- Canada’s economy appears more resilient than previously thought, but the central bank still sees “economic slack,” which helps keep inflation close to the 2% target.
- Monetary authorities assessed that the current rate level is “appropriate” as long as the October forecast remains valid.
- However, the bank remains ready to respond if the economic outlook deteriorates.
- The latest data show a strong rebound: 181,000 new jobs added over the past three months and a surprising 2.6% annualized GDP growth in Q3.
- BoC governor Macklem noted that revised GDP data for 2022–2024 suggest the economy was healthier than previously believed before Canada was hit by the new U.S. tariffs.
- Despite stronger data, the central bank believes the medium-term growth path remains moderate, and inflation should stay close to target in 2026.
- The bank’s next projections will incorporate Prime Minister Mark Carney’s first federal budget, which, according to the bank, may boost both demand and supply in the economy.
- Uncertainty is also increased by the upcoming review of the NAFTA/USMCA trade agreement and the economy’s adjustment to higher tariffs.
- The bank pointed out that significant volatility in trade and GDP data makes it difficult to assess the true underlying momentum of the economy.
- The labor market shows signs of improvement: unemployment is falling and employment is rising, although companies in trade-sensitive sectors remain cautious.
The USDCAD pair erased some gains after the Bank of Canada decision.
Source: xStation5
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