Bank of Canada officials unanimously agreed earlier this month to keep the overnight rate steady at 2.25%, but there remains significant internal uncertainty over whether the next policy move should be another rate cut or a shift toward tightening.
According to the central bank's meeting minutes released Tuesday from its December 10 rate decision, policymakers noted that the current "highly uncertain environment" makes it "difficult to predict the timing and direction of the next policy rate adjustment." The bank reiterated its readiness to respond if significant changes occur in economic activity or inflation outlook.
The minutes revealed that the seven-member Governing Council also focused on the potential impact of the USMCA (U.S.-Mexico-Canada Agreement) on Canada's economy. Officials warned that a collapse of the trade deal could severely damage the economy, while progress in negotiations—providing stability for North American trade policy—could boost business investment.
On macroeconomic data, the bank highlighted recent volatility in quarterly GDP figures, which "underscores the challenges in assessing underlying economic trends." Officials expect weaker fourth-quarter growth, with consumption, housing activity, and government spending partly offsetting softness in business investment and net exports.
Preliminary data showed Canada's GDP edged higher in November, reversing October's 0.3% contraction. However, the bank cautioned that quarterly growth could still turn negative.
Analysts suggest the Bank of Canada is now in "wait-and-see mode," with future monetary policy heavily dependent on domestic economic momentum, external trade uncertainties, and the progress of North American trade talks.
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