Bank of Canada on hold, no appetite for hikes seen in the foreseeable future

The Bank of Canada (BoC) kept its benchmark interest rate at 0.5 percent on Wednesday as widely expected. The central bank noted that underlying economic conditions don't warrant a change in policy at this time. The BoC cut its core lending rate twice in 2015 in an attempt to stimulate the Canadian economy.  It continues to expect healthy economic growth in the second half of the year as the economy bounces back from the second quarter setback.

Nevertheless, BoC noted that "the ground lost over previous months raises the possibility that the profile for economic activity will be somewhat lower than anticipated in July." While inflation remains roughly in line with the Bank of Canada's expectations, the balance of risks around the inflation profile are seen as tilted to the downside relative to previous expectations.

BoC statement placed particular focus on developments in the U.S. economy. The Bank appears increasingly concerned with the global growth backdrop, in particular the U.S. and sees a less certain outlook for U.S. business investment.

BMO economist Doug Porter saw very little in the statement to suggest the bank is thinking about raising interest rates to more normal levels any time soon. "It's pretty clear the bank has zero appetite for rate hikes," he said in a note to clients after the bank's statement came out.