Newspaper article The Canadian Press

Trade and Uncertainty Weigh on Economy, Bank of Canada Deputy Governor Says

Newspaper article The Canadian Press

Trade and Uncertainty Weigh on Economy, Bank of Canada Deputy Governor Says

Article excerpt

Trade fights, uncertainty weigh on economy

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The Canadian economy has shaken off the weakness seen at the start of the year, but escalating trade conflicts and related uncertainty are taking a toll, a senior Bank of Canada official said Thursday.

In a speech in Halifax, deputy governor Lawrence Schembri said the Canadian economy has rebounded from its earlier soft patch, but the economic data shows some areas of concern.

Schembri said the Canadian economy is operating close to full potential with low unemployment and inflation right on the central bank's target.

"This solid starting point means the economy has a welcome degree of resilience to possible negative economic developments," he told the Halifax Regional Chamber of Commerce according to prepared remarks released in Ottawa.

"That said, we agree that the data show some areas of concern. Among these is the weakness in consumption ... and, of course, we are concerned about the drop in business investment, which is likely linked to ongoing trade war and related uncertainty."

The Bank of Canada kept its key interest rate target on hold on Wednesday, but said it is keeping a watchful eye on the global economy. The central bank adjusts the rate in order to manage inflation. Many economists have predicted the bank will cut rates later this year.

The central bank's wait-and-see approach this week came as other central banks around the world have been signalling or taking actual action, including interest rate cuts to respond to the trade risks and deteriorating global economy.

"In this uncertain environment, central banks have been conducting monetary policy appropriate to their own circumstances and outlooks. This has contributed to lower bond market yields and reduced borrowing costs in Canada," Schembri said.

The deputy governor added at a news conference that the Bank of Canada has been accounting for trade issues in its economic forecasts for several years now.

"Initially it was NAFTA-related and more recently obviously it's the U. …

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