Bank of Canada Governor Stephen Poloz says his trend-setting interest rate is low enough at its current level of 1.75% to stimulate the economy.
In prepared remarks delivered on Thursday in Montreal, Governor Poloz said that the benchmark interest rate's rise to its likely destination range of between 2.5% and 3.5% is "highly uncertain."
The bank's destination range — or neutral range — is an estimate of the preferred level for the interest rate when the economy is operating at full capacity and inflation is within its target zone of 1% to 3%. Governor Poloz reiterated Thursday that Canada’s central bank will scrutinize incoming data in order to study how several important uncertainties unfold.
Those uncertainties include the impact of higher interest rates on indebted Canadians, how housing markets adjust to higher borrowing costs and stricter mortgage guidelines, whether business investment picks up its pace and the "highly uncertain" global trade environment.
"Given these uncertainties, we have kept interest rates unchanged at 1.75% since last October," Governor Poloz said in a speech to the Chamber of Commerce of Metropolitan Montreal. "We will remain decidedly data-dependent as the domestic and international situations evolve."
Canada’s improved economy has encouraged the bank to raise its key interest rate five times since mid-2017 to keep inflation from creeping up too high — but it hasn't introduced an increase since last October.
Statistics Canada's December inflation reading was 2% and the Bank of Canada’s next interest-rate announcement is scheduled for March 6 — and many market watchers expect the central bank to leave the benchmark untouched until late this year.
