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Bank of Canada holds rates, sees some evidence global economy is stabilizing

Credit: REUTERS/CHRIS WATTIE

The Bank of Canada held its overnight rate at 1.75% as expected on Wednesday and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook.

By Kelsey Johnson

OTTAWA, Dec 4 (Reuters) - The Bank of Canada held its overnight rate at 1.75% as expected on Wednesday and cited early signs the global economy was stabilizing, while stressing that uncertainty caused by trade wars remained the main threat to its outlook.

The central bank - which has held rates steady since October 2018 - said future moves would depend on its assessment of the damage done by trade conflicts versus sources of resiliency in the economy, notably consumer spending and housing activity.

"There is nascent evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years," it said in a statement.

Investment spending showed unexpectedly strong growth in the third quarter and the extent to which this points to renewed momentum in investment will be assessed in months to come.

"Ongoing trade conflicts and related uncertainty are still weighing on global economic activity and remain the biggest source of risk to the outlook," the bank said.

Several of the bank's counterparts, including the U.S. Federal Reserve, have recently eased rates.

In October, Bank of Canada Governor Stephen Poloz said the current level of stimulus remained appropriate but left the door open to a possible cut in the coming months because of trade tensions. He said in November he thought monetary conditions were about right.

Money markets had seen little chance of a cut in December. A Reuters poll last month found a slim majority of economists expect the central bank to hold rates steady through to the end of 2020. BOCWATCH

Third-quarter consumer spending expanded moderately while housing investment was also strong, the bank said, adding it "continues to monitor the evolution of financial vulnerabilities related to the household sector."

Inflation remains at the bank's 2% target and is expected to track close to that figure for the next two years, despite temporary increases in the coming months because of year-over-year movements in gasoline prices, it added.

(Reporting by Kelsey Johnson; editing by David Ljunggren)

((1-613-235-6745; kelsey.johnson@tr.com))

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