As widely expected, the Bank of Canada maintained its target for the overnight rate at 1.75%. Below are some key takeaways from the BoC's policy statement.
- The global economic expansion continues to moderate, with growth forecast to slow to 3.4 per cent in 2019 from 3.7 per cent in 2018.
- There are increasing signs that the US-China trade conflict is weighing on global demand and commodity prices.
- The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income.
- Consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates.
- The Bank projects real GDP will grow by 1.7 per cent in 2019, 0.4 percentage points slower than the October outlook.
- Core inflation measures remain clustered close to 2 per cent. As expected, CPI inflation eased to 1.7% in November, due to lower gasoline prices.
- Weighing all of these factors, Governing Council continues to judge that the policy interest rate will need to rise over time into a neutral range to achieve the inflation target.
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