The Bank of Canada, the national central bank, announced on Thursday the beginning of its annual Monetary Policy Report. This week’s report includes the release of the bank’s forecast, based on projections for economic growth and inflation as well as the potential effects of trade tariffs and uncertainties around a U.S.-China trade agreement.
During its September interest rate decision, the Bank of Canada raised its interest rate by 25 basis points to 1.25 percent. It has now forecast interest rates to remain constant for a period of six quarters. During the first half of 2019, the central bank believes the Canadian economy will grow by 3.5 percent. There will be only a slight increase in the unemployment rate, which is now at 6.1 percent. After this first half of 2019, the bank expects inflation to increase toward its 2 percent target.
The effects of the trade war between the United States and China are not significant at this time, the bank reported. The latest official news from China is that the country’s premier has canceled a scheduled trip to Canada for the G20 Summit this weekend. The Russian leader has also rescheduled his meeting with President Trump.
This year, the bank is more pessimistic about the future. It expects Canada’s rate of economic growth to slow to 2.5 percent in 2019, then increase by 2.25 percent in 2020. This growth rate is less than previously projected, which the bank attributes to uncertainty about the future of NAFTA.
For the U.S. dollar, the bank expects the Federal Reserve to continue raising interest rates over the coming years, but anticipates two more increases in 2019 and no more increases in 2020. On a year-over-year basis, inflation in the U.S. is expected to go up by 1.75 percent in 2019 and by 1.5 percent in 2020.
To read the bank’s full summary of their annual monetary policy report, click here.
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