BoC gov’s decision today likely to lead to 'prolonged pause'

BoC governor Stephen Poloz will most likely set the stage for a lengthy pause on interest rate hikes today, according to analysts surveyed by Bloomberg.

The benchmark overnight rate is expected to stay at 1.75%, amid the more troubling impacts of a sustained economic slowdown aggravated by slower global growth and a cross-Pacific trade war.

Such a decision would be the fourth consecutive hold by the bank.

“The Bank of Canada is still one of the most hawkish central banks globally, and I expect Governor Poloz is going to want to maintain some optionality [to raise rates],” Manulife Asset Management head of macroeconomic strategy Frances Donald said, noting that this stance will give the central bank the tools that it will need to stave off “another borrowing binge.”

“Full capitulation like we’ve seen from the Federal Reserve or the European Central Bank in my view is unlikely,” Donald added.

Earlier this month, Poloz asserted that the Canadian economy will still benefit from the boost that low borrowing costs can provide, considering the current environment of global economic uncertainty.

“That is why we said at our last interest rate announcement in March that the economic outlook continues to warrant a policy interest rate that is below the neutral range to help the economy work through this downshift in growth and keep inflation close to target,” Poloz stated back then, as quoted by BNN Bloomberg.

“There are challenges in the Canadian and global economies that we need to manage, but there are clear signs that Canada is adjusting to the challenges… “Recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary.”