The Globe and Mail reports in its Saturday edition that with inflation indicators stabilizing near the Bank of Canada's target, the economy growing solidly and unemployment at 40-plus-year lows, the bank had the all-clear to raise interest rates three times during the year. The Globe's David Parkinson and Barry McKenna write that it got there in spite of a steady barrage of uncertainties throughout the year: North American trade negotiations, steel and aluminum tariffs, United States tax cuts, Brexit, and oil-pipeline delays all complicated the BOC's job.
Only two months ago, Governor Stephen Poloz talked cheerily about how the economy was back. He laid out a plan to normalize the bank's key interest rate, getting it back up to a neutral range -- somewhere between 2.5 per cent and 3.5 per cent, by the bank's estimation -- where monetary policy is neither driving growth higher, nor slowing it down. A fall in the price of Canadian crude oil caused Mr. Poloz to rethink his economic narrative in the BOC's early December interest-rate announcement. The BOC has replaced some of its bolder rhetoric with a sharp note of caution heading into 2019. The economic outlook is suddenly uncertain. Rate hikes are on hold for now.
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