Investing.com – The Bank of Canada (BoC) kept its benchmark interest rate unchanged on Wednesday as it specifically warned of the damage to both confidence and the economy by pending trade disputes.
“While the sources of moderation appear to be multiple, trade tensions and uncertainty are weighing heavily on confidence and economic activity. It is difficult to disentangle these confidence effects from other adverse factors, but it is clear that global economic prospects would be buoyed by the resolution of trade conflicts,” the BoC said in its statement.
The BoC also said that conditions continue "to warrant a policy interest rate that is below its neutral range."
Most analysts had expected no change in rates after Canada's gross domestic product growth slowed to 0.1% in the fourth quarter, its worst performance in two-and-a-half years.
That data showed consumer spending grew at the slowest pace in nearly four years, housing fell by the most in a decade, business investment dropped sharply for a second-straight quarter, while domestic demand posted its largest decline since 2015.
The BoC noted that the slowdown at the end of 2018 was "sharper and more broadly based" than it had forecast and now expects that the economy will be weaker in the first half of 2019 than it had projected back in January.
"It will take time to gauge the persistence of below-potential growth and the implications for the inflation outlook. With increased uncertainty about the timing of future rate increases, Governing Council will be watching closely developments in household spending, oil markets, and global trade policy," it concluded.