Canada’s central bank now expects the economy to slowdown in the final months of this year due to an escalating global trade war and volatility south of the border.
The Bank of Canada revised down its forecast for the Canadian economy Wednesday even as it announced that it is holding its benchmark interest rate at its current level of 1.75%. In a news release, the central bank noted that "escalating trade conflicts" are now starting to take a toll on the country's economy.
While exports continue to grow, the housing market appears to be on a rebound, and employee wages are rising, the Bank of Canada noted that business investment is weakening because of the ongoing trade war between the U.S. and China. As a result, the Bank of Canada forecasts the economy will slow down in the second half of 2019.
"Canada's economy is operating close to potential and inflation is on target," the bank said in its news release. "However, escalating trade conflicts and related uncertainty are taking a toll on the global and Canadian economies."
Now that the central bank has decided to hold interest rates at current levels, but signaled its belief that an economic slowdown is coming, traders are pricing in a 50% chance that the Bank of Canada will cut interest rates at its next meeting in October.
