Advertisement

Bank of Canada holds rates, sees no cooling in housing yet

A sign is pictured outside the Bank of Canada building in Ottawa, Ontario, Canada, May 23, 2017. REUTERS/Chris Wattie

OTTAWA, May 24 (Reuters) - The Bank of Canada held interest rates steady on Wednesday, as expected, saying that while economic growth is likely to moderate in the second quarter, government measures to rein in the housing market have not yet had a substantial cooling effect. Reiterating its position that excess capacity remains in the economy and wage growth is subdued, the central bank nevertheless noted strong spending by Canadians along with a housing boom and job growth. "Consumer spending and the housing sector continue to be robust on the back of an improving labor market, and these are becoming more broadly based across regions," the bank said in a statement accompanying the interest rate decision. The bank kept the benchmark interest rate at 0.50 percent, as widely expected, saying its monitoring of data suggests that very strong growth in the first quarter of the year will be followed by "some moderation" in the second quarter. It said that inflation is broadly in line with the bank's projection in April despite temporary downward pressure from lower food prices. While noting the country's exporters continue to face "ongoing competitiveness challenges," it said recent indicators of business investment are encouraging. While recent macroprudential measures aimed at cooling the housing market have contributed to more sustainable debt profiles, they "have yet to have a substantial cooling effect on housing markets," the bank said. Governments have tightened mortgage lending rules and imposed a foreign buyers tax in Vancouver and Toronto amid fears of a housing bubble. (Reporting by Andrea Hopkins and Leah Schnurr)