In October, the Bank of Canada said it could finally see home on the horizon. Then a storm rolled in. Canada’s central bank left its benchmark interest rate unchanged at 1.75 per cent on Dec. 5, and it seems likely the pause will last longer than many had expected just a day earlier. Negatives outweigh positives in the Bank of Canada’s new policy statement , a shift from October, when Governor Stephen Poloz and his deputies raised interest rates a quarter point. The biggest concern is oil, an important source of export income. Policy makers had been holding out hope that Canadian prices might recover somewhat. Now, they say the desperate situation in Alberta likely means the energy industry’s contribution to economic growth will be “materially weaker” than expected only a couple of months ago. The darker tone caught traders by surprise . The value of the Canadian dollar plunged, and the prices of financial assets tied to short-term interest rates imply that the official borrowing rate will remain unchanged for the remainder of the winter at least. At the start of the week, those markets were predicting a quarter-point increase in January. “The timing of the next few […]
