Bank of Canada holds interest rate, warns of ‘significant uncertainties’

The Bank of Canada is holding its trend-setting interest rate at 0.5 per cent – but it’s keeping a watchful eye on “significant uncertainties” that it warns could alter the economy’s improving trajectory.

The central bank’s scheduled rate announcement Wednesday arrived as Canada tries to assess the direction of U.S. economic policy under President Donald Trump and the potential fallout from any changes he may bring.

The bank has said some U.S. proposals, which include tax cuts, a border tax and protectionist policies, would have “material consequences” for Canadian investment and exports.

In an unusually short statement Wednesday, the Bank of Canada used slightly stronger language when referring to U.S. uncertainties than it did in the news release that accompanied its last rate announcement on Jan. 18.

At that time, two days before Trump’s inauguration, the bank indicated that “uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States.”

On Wednesday, the statement did not specifically mention the U.S. uncertainty.

“The bank’s governing council remains attentive to the impact of significant uncertainties weighing on the outlook,” the release said.

In explaining the decision by governor Stephen Poloz’s council to stick with the current interest rate, the bank said that improvements seen in recent data releases have been consistent with its projections.

The central bank also expects growth in the fourth quarter of 2016 – as measured by real gross domestic product – might come in slightly stronger than predicted because of recent consumption and housing data releases. Statistics Canada is scheduled to release those GDP figures Thursday.