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  • Bank of Canada says  degree of accommodation remains appropriate.
  • Notes ongoing trade tensions are having a material effect on global economic outlook.

As widely expected, the Bank of Canada decided  to maintain its target for the overnight rate at 1.75% at its July  policy meeting. The bank refrained from hinting at the next policy move in its statement. With the initial market reaction, the USD/CAD pair gained more than 50 pips and erased its daily lows to turn positive on the day above 1.3130.  Below are some key takeaways from the BoC’s policy statement, as reported by Reuters.

“Degree of accommodation remains appropriate.”

“Canadian economy returning to potential growth but outlook is clouded by persistent trade tensions.”

“Raises annualized Q1 GDP forecast to 0.4% from 0.3%, raises Q2 forecast to 2.3% from 1.3%, forecasts Q3 GDP of 1.5%.”

“Q2 growth stronger than predicted due to temporary factors, including reversal of weather-related slowdowns and a surge in oil output.”

“Ongoing trade tensions are having a material effect on global economic outlook; escalation of trade conflicts remains biggest downside risk to global and canadian outlooks.”

“Cuts 2019 global growth forecast to 3.0% from 3.2%, cuts 2020 global growth forecast to 3.2% from 3.3%.”

“Ntional housing market stabilizing with significant adjustments still taking place in some regions; decline in longer-term mortgage rates is supporting housing activity.”

“Overall inflation rate will likely dip this year because of the dynamics of gasoline prices and other temporary factors, expected to drop to 1.6% in Q3 before rising to 2.0% in Q4.”

“Will pay particular attention to developments in energy sector and impact of trade conflicts.”

“Investment in oil sector expected to stabilize by 2020 and exports should gradually increase; consumer spending expected to grow steadily.”

“Estimates that China trade actions against canola and meat products will cut Canadian exports by about 0.2% over q2 and Q3.”