Bank of Canada to make interest rate announcement, predictions for the economy

OTTAWA — The Bank of Canada will decide today whether to continue raising interest rates, and will issue its latest predictions for the Canadian economy.

Most economists expect the central bank to retain its key rate at 1.25 per cent, the level it has been at since the last quarter-point increase in January.

But they’ll be watching to see if central bank governor Stephen Poloz signals more rate hikes ahead, especially given recent prospects of a deal from the renegotiations of the North American Free Trade Agreement with the United States and Mexico.

Scotiabank Capital Markets economist Derek Holt says the Bank of Canada is facing “a conundrum of sorts,” in that economic growth has been disappointing as the NAFTA talks progressed, yet wage and price pressures are building.

That, he says, puts pressure on the bank to increase rates as a way of taming inflation.

On Tuesday, the International Monetary Fund projected a moderate 2.1 per cent economic growth rate for Canada this year, but flashed warning signs of potential trouble ahead for the global economy.