The only thing standing in the way of higher interest rates is the uncertain future of the North American Free Trade Agreement.
Canada’s central bank left its the official borrowing rate unchanged at 1.5 per cent on Wednesday, stating in the final sentence of the announcement that officials will be “monitoring closely the course of the NAFTA negotiations and other trade policy developments, and their impact on the inflation outlook.”
That line was notable for a couple of reasons.
First, it reflects the urgency of Canada’s talks with the Trump administration, which resumed in Washington at the same time the Bank of Canada updated its policy stance. Negotiators missed a deadline to complete an agreement by Aug. 31, although officials now appear to have decided they have more time. At stake for Canada is preferential access to the market that purchases about three-quarters of its exports.
“The atmosphere continues to be positive,” Chrystia Freeland, the foreign affairs minister, told reporters as she took a break from negotiating. “We are working for a good deal, not just any deal.”
Central bankers’ decision to mention “NAFTA” by name in the official policy statement also stood out because, otherwise, they had little negative to say about Canada’s prospects. The only other clouds mentioned were pockets of financial stress in emerging markets and weaker commodity prices. But their obvious satisfaction with the outlook hardened expectations that the Bank of Canada will increase interest rates in mid-October. [기사 전문 ↓]
Source: Bank of Canada holds interest rate at 1.5% | Financial Post