Highlights:

  • As expected, the overnight rate was held steady at 1.75% with the bank indicating policy stimulus is still needed
  • The bank pushed out the timing of when the economy will break out of the current weak patch
  • The statement still suggests the bank anticipates rates will move higher although the timing is uncer-tain

The bank punted the timing of the economy pulling out of the current weak patch today pointing to the growing downside risks to the economic outlook. While the energy sector is high on the bank’s list of things to monitor, the weakness in consumption late last year and continued correction in the housing market also rated on their list of concerns. The optimism about exports and non-energy investments in the January statement was also missing with the bank pointing to these sectors as weaker than expected late last year.

Against an increasingly uncertain global backdrop, the bank is prepared to maintain a policy rate that is providing some support to the economy. That said, the bank did not dispense with the prospect that in-terest rates will rise in the future. The biggest uncertainty is when the economy will be strong enough to warrant another move higher. Our forecast is that Canada’s economy will pickup pace in the second quarter as the transitory impact from the weak energy sector fades and the underlying strength in the labour market pumps up wages and limits the slowing in consumption activity. With the economy likely to record another soft quarter in Q1 and global uncertainty persisting, no rate increase is likely until the second half of the year.

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