Canadian Interest Rates Unchanged

The Bank of Canada left its target interest rate unchanged at 1.75% yesterday. This represents a balancing act between an unexpectedly strong GDP performance in Q2 on the one hand, and several moderating factors on the other - an expectation that GDP growth will slow in the balance of the year, slower growth in consumer expenditure in Q2, and international trade tensions (chiefly between the US and China). The Bank's announcement (here) indicated it remains watchful, and did not contain any particularly strong hints about future interest rate policy, although some analysts think that a decrease in the rate next month is a definite possibliity. The Bank did note the inverted bond yield curves that have developed recently in the Canadian and other economies - usually a signal of an upcoming recession. This risk might be sufficient to cause a rate drop at some point during the rest of the year.