As was widely anticipated, the Bank of Canada kept its key policy interest rate on hold at 0.5 percent. The central bank’s statement accompanying the decision struck a neutral tone, noted TD Economics. The statement emphasized a number of positive points: a global economy that “continues to gain traction” and a likely rebound in U.S. economic growth following a subdued first quarter. The adjustment to lower oil prices is seen as greatly in the rear view, as recent economic data is seen as encouraging, aided by rebounds in labor markets that are widening, stated TD Economics.

Offsetting the positives are lower wage and price growth that are viewed as consistent with ongoing excess capacity in the economy. The uncertainties emphasized in the BoE’s April Monetary Policy Report continue to be in place, and export growth stays modes amidst “ongoing competitiveness pressures”. Macroprudential measures are likely to add to more sustainable debt profiles, but are not seen to have had any significant easing effect to date.

Despite the signs of still solid economic growth in the nation, Governor Poloz chose to once again strike a cautious, if balanced tone, stated TD Economics. The short statement that accompanied today’s decision covered both sides of the ledger, acknowledging the positive tone of recent Canada’s data, but also emphasizing areas of concern.

The risks modelled by the housing sector stayed tangible given the lagged effects of macroprudential policies, and crucially, price pressures, whether in terms of wages or inflation, are greatly non-existent at the moment, added TD Economics. The central bank intends to control inflation in the medium term.

“As we move into early 2018, the strong economic growth of recent quarters should begin translating into inflationary pressures, motivating the start of a gradual tightening cycle”, stated TD Economics.