Bank of Canada Holds Interest Rates

CBJ — The Bank of Canada has held its key interest rate target steady at 0.5% but did raise concerns after the export sector disappointed earlier this year.

“While the strength in exports during July was encouraging, the ground lost over previous months raises the possibility that the profile for economic activity will be somewhat lower than anticipated,” the central bank said in its rate announcement.

The Canadian economy contracted at an annual pace of 1.6% in the second quarter, worse than the 1.0% pace that had been forecast by the Bank of Canada in its July monetary policy report.

The decline came due to the Alberta wildfires in May and a drop in exports that was larger and more broad-based than expected, the bank said.

However, the economy grew in June and the latest trade figures from Statistics Canada showed export gains in July.

Bank of Montreal chief economist Doug Porter said the Bank of Canada has “zero appetite for rate hikes.”

The central bank also touched on the real estate market, which has become an area of growing concern in the hot markets of Vancouver and Toronto.

Bank of Canada governor Stephen Poloz has warned that soaring house prices in Vancouver and Toronto have been climbing at an unsustainable clip as prices have outpaced local economic fundamentals.