Banks of Canada holds rate at 1.25%

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Meeshika Sharma
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The Bank of Canada kept its key interest rate target on hold Wednesday as it pointed to a climate of broadening, important unknowns around trade.

In explaining its decision to maintain its benchmark at 1.25 per cent, the central bank noted that recent trade policy developments have created thickening clouds around the outlook for the Canadian and global economies.

U.S. President Donald Trump recently added threats of steel and aluminum tariffs to an already uncertain context for Canada that includes concerns over NAFTA's renegotiation and fears over competitiveness, following corporate tax-cut announcements south of the border.

The Bank of Canada also noted fourth-quarter growth was weaker than expected, largely due to higher imports, and that it's still assessing impacts on housing markets from new policies, including recent changes to mortgage rules.

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Ahead of the announcement, governor Stephen Poloz was widely expected to hold off moving the rate because of weaker economic numbers in recent weeks and the expanding trade uncertainty.

publive-imagePoloz has introduced three rate hikes since last summer, including an increase in January. The moves came in response to an impressive economic run for Canada that began in late 2016.

Earlier this month, Poloz noted in a speech that central bankers have had to grapple with the ongoing "era of heightened uncertainty."

In monitoring the country's housing data, the bank said a surge of strong numbers in late 2017 was followed by softer figures early this year. This suggests "some pulling forward of demand ahead of new mortgage guidelines and other policy measures," the bank said.

The central bank's next rate announcement is scheduled for April 18, when it will also publish its updated economic projections.

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