The Globe and Mail reports in its Thursday edition that the Bank of Canada kept its benchmark rate unchanged Wednesday at 1.75 per cent. The Globe's Barrie McKenna writes that the BOC sees a weaker economy in the first half of 2019 than it forecast two months ago.
The shift in tone moves Governor Stephen Poloz a step closer to shelving entirely a plan to raise rates in the months ahead. Mr. Poloz had "little choice but to water down" his rate-hike warnings in the face of slowing global and Canadian growth, says CIBC economist Avery Shenfeld. Barring a sudden economic rebound, "further rate hikes in 2019 are all but off the table," says TD economist Brian DePratto. Bloomberg says the probability of a rate cut in the coming months has jumped to nearly 10 per cent from zero before Wednesday's BOC statement. Mr. McKenna says the bank appears to be setting itself up to close the door on its rate-hike commitment.
On Wednesday the bank took a major step back from its previously stated commitment to further rate increases. It now says that "the outlook continues to warrant a policy interest rate that is below its neutral range."
Mr. McKenna says the BOC has opened a window, at least a crack, for a rate cut.
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