After seven consecutive reductions, the Bank of Canada left its key overnight lending rate unchanged at 2.75% on Wednesday.
Market odds had been about evenly split between another 25-point basis cut and the Bank standing pat heading into today’s announcement, which follows a Statistics Canada report yesterday which showed headline inflation in March at 2.3%, down from 2.6% in February.
In its announcement, the Bank cited the global economic uncertainty being caused by the trade policies of US President Donald Trump, which may blunt economic growth while also pushing consumer prices higher.
The Canadian economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence, the Bank said, adding that consumption, residential investment, and business spending all look to have weakened in the first quarter. Amid the trade tensions, employment declined in March and businesses are reporting plans to slow their hiring.
On the other hand, short-term inflation expectations have moved up, as businesses and consumers anticipate higher costs from trade conflict and supply disruptions, the Bank said.
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