(Adds market reaction, analyst comments)
By Leah Schnurr and David Ljunggren
OTTAWA, March 1 The Bank of Canada acknowledged
on Wednesday that fourth-quarter growth might have been stronger
than anticipated, but it left interest rates unchanged at 0.50
percent as it focused on the "significant uncertainties" facing
In an unusually short policy statement, the central bank
maintained its cautious stance. It downplayed the fourth-quarter
strength by pointing to the large amount of unused capacity in
the economy and saying it was looking past the recent rise in
inflation as being due to temporary factors.
Economists said the statement kept the bank's dovish stance
intact after Governor Stephen Poloz said in January that a rate
cut remained on the table if the risks to the economy
"Effectively they're saying not much has changed since
January," said BMO Capital Markets chief economist Doug Porter.
"We have had a wave of stronger-than-expected Canadian data,
yet the bank is fairly steadfast in playing down some of the
positives and highlighting some of the negatives."
The Canadian dollar hit a five-week low following the
statement. The bank cut rates twice in 2015 during a collapse in
oil prices, and the statement reinforced analysts' expectations
that it will stay on the sidelines until next year.
The bank said it was still monitoring the risks outlined in
its January Monetary Policy Report, which included lack of
clarity over what policies U.S. President Donald Trump will
While Trump has said the United States will be "tweaking"
its relationship with Canada, the effects of his promised
changes to trade and taxes are not clear, and his speech on
Tuesday offered no new details. Canada sends 75 percent of its
exports south of the border.
Recent consumption and housing market figures suggest
economic growth in the fourth quarter may have been "slightly
stronger" than the 1.5 percent the bank had forecast, the Bank
of Canada said, but exports continue to face competition.
CIBC Capital Markets senior economist Royce Mendes said the
Bank of Canada's statement reflected that it would take time for
"this desired rotation" from consumption and housing toward
exports and investments.
In contrast to the United States, subdued wage growth and
hours worked in Canada also showed persistent economic slack
despite recent gains in employment, the central bank said.
(Additional reporting by Alastair Sharp, Fergal Smith and
Solarina Ho in Toronto; Editing by Denny Thomas and Lisa Von