The Bank of Canada Wednesday announced to keep its interest rate unchanged at 1.25 percent, saying it remains cautious about its next rate move as it ponders various downside risks to the economy.
"While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target," said the Canadian central bank in a statement.
Canada's economy was slowing at the end of 2017, with annualized growth of 1.7 percent in the fourth quarter, down sharply from the three-percent pace for the year as a whole.
Keeping interest rate steady after three rate hikes since last July, the bank said that fourth-quarter GDP growth was slower than expected, largely due to higher imports, while exports made only a partial recovery from their third-quarter decline.
The bank's announcement comes after U.S. President Donald Trump's threat of imminent tariffs on steel and aluminum imports is spreading fear of a global trade war.
Canada is the largest exporter of both commodities to the United States. It has expressed that new U.S. tariffs are "absolutely unacceptable."
Canada is also facing uncertainty over the fate of the North American Free Trade Agreement. The United States has demanded concessions from both Canada and Mexico in ongoing renegotiation talks.
"However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks," the bank said.
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