Uncertainty sparks rate pause by Bank of Canada
After seven straight interest-rate cuts buoyed the spirits of businesses and individuals managing debt, it seems economic uncertainty has become a double-edged sword.
The Bank of Canada announced today that its target rate will remain at 2.75%, after inflation came in at 2.3% in March.
The reasoning for the pause was to provide a buffer for the future, which, ironically, had also been cited as a reason to continue to reduce rates. Lower interest rates spur consumer and business spending — good if we’re facing a downturn — but lower rates could also cause inflation to increase, which would be bad.
“Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war,” the Bank said. “What it can and must do is maintain price stability for Canadians.”
The Bank’s Governing Council said risks to the Canadian economy include:
- reduced demand for Canadian exports
- lower business investment, employment and household spending
- and cost increases being quickly passed on to consumers.