Bank of Canada holds interest rate steady

ATB Economics and Research Team Dec 4th,2019

In its final scheduled announcement of 2019, the Bank of Canada is leaving its policy interest rate at 1.75 per cent. A rate cut would have been better news for the sluggish Alberta economy, but a national economy “operating near capacity” prompted the Bank to buck the trend among other central banks and keep the rate steady.

The Bank cited the positive effect of rate cuts of other central banks on financial markets and the reduced fears of a global recession as reasons for holding steady. It did, however, note how trade conflicts continue to weigh on the global economy and “remain the biggest source of risk to [the Bank’s] outlook.”

In terms of the Canadian economy, the Bank noted a number of “sources of resilience” including rising consumer spending, wage growth, and investment in housing as the population continues to grow and mortgage rates remain relatively low. The Bank also pointed to growth in capital spending, “notably in transportation equipment and engineering projects.”

Unfortunately, the national picture does not match the situation in Alberta, where economic growth remains boxed in by insufficient pipeline capacity, high unemployment, and a harvest season hampered by bad weather.

The next interest rate announcement is scheduled to take place on January 22, 2020.