Bank of Canada keeps key rate unchanged, but says future hikes likely

Bank of Canada keeps key rate unchanged

But future hikes may be on the way


OTTAWA — The Bank of Canada left its benchmark interest rate unchanged today after raising it twice since the summer— but it signalled that future hikes are likely on the horizon.

In its scheduled announcement, the central bank says it held off this time in part because it expects the recent strength of the Canadian dollar to slow the rise in the pace of inflation.

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The bank is also pointing to the substantial, persistent unknowns around geopolitical developments as well as U.S.-related fiscal and trade policies, like the renegotiation of the North American Free Trade Agreement.

However, the bank says while its still-low interest rate of one per cent will likely rise over time, the governing council will remain cautious when it comes to future increases.

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The central bank is also releasing updated projections that predict economic growth to moderate after a surprisingly powerful performance in recent quarters, as housing- and consumer-related contributions start to decline.

The bank forecasts growth, as measured by real gross domestic product, to slow from its exceptionally robust level of 3.1 per cent this year to 2.1 per cent in 2018 and 1.5 per cent in 2019.