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The Bank of Canada (BoC) today maintained its target for the overnight rate at 1.25%, citing the growing uncertainty around trade.

The bank rate is correspondingly 1.5%, and the deposit rate is 1%.

In a press release, the central bank said global growth remains solid and broad-based, and it noted that U.S. government spending and tax cuts are expected to boost that country’s growth in 2018 and 2019.

Read: In 2017, Canadian economy grew more than twice as fast as 2016

“However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks,” said the BoC.

The central bank noted that Canada’s GDP was 3% in 2017, which was in line with the bank’s projection in its last monetary policy report in January. However, fourth quarter growth was slower than expected, largely due to higher imports.

“The gain in imports mainly reflected stronger business investment, which adds to the economy’s capacity,” said the BoC.

At the same time, exports made “only a partial recovery” in the fourth quarter, after a decline in Q3.

The central bank also noted softening housing data at the beginning of 2018 in the face of new mortgage rules and other policy measures.

Read: BMO extends mortgage rate guarantee period for homebuyers

More broadly, the central bank said it “continues to monitor the economy’s sensitivity to higher interest rates. Notably, household credit growth has decelerated for three consecutive months.”

In an emailed note to clients, Royce Mendes, director and senior economist at CIBC World Markets, described the BoC’s announcement as dovish.

“Cooling growth left little reason for central bankers to rush another rate hike,” he says. “But U.S. steel and aluminum tariffs sealed the deal.”

Read: How a U.S. trade war could affect markets

Mendes says the mention of tighter housing policies and assessment of the effects of past rate hikes also call for a patient approach, “as does the mention that business investment will add to capacity, thereby signalling less pressure on inflation.”

The BoC also said the federal budget’s effect on growth and inflation will be incorporated into its April projection. And the central bank noted how its core measures of inflation have risen, “consistent with an economy operating near capacity.”

Read: Morneau defends budget’s scant focus on U.S. tax reforms

Further, fluctuating inflation is due to “temporary factors related to gasoline, electricity and minimum wages,” it said.

The central bank also said that, while the economic outlook likely warrants 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.”

It will continue to remain cautious, and guided by data to assess “the economy’s sensitivity to interest rates, the evolution of economic capacity and the dynamics of both wage growth and inflation.”

The next scheduled rate announcement is April 18, and will include a monetary policy report.

In emailed commentary to clients, National Bank economists say, “We expect the BoC to remain on the sidelines for another couple of months, by which time there may be more clarity on trade, something that may allow the central bank to raise interest rates two more times later in the year.”

Says Mendes: “We’re sticking to our call that the BoC only hikes interest rates once more in 2018.”

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