INSTANT VIEW-Bank of Canada holds its benchmark interest rate

TORONTO, June 4 - The Bank of Canada on Wednesday held its key benchmark rate at 2.75%, citing the need to probe the effects of U.S. trade policy. The bank said another cut might be necessary if the economy weakened in the face of tariffs.

MARKET REACTION: CAD/

LINK: https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/

COMMENTS

NICK REES, SENIOR FX MARKET ANALYST AT MONEX EUROPE LTD

"The BoC left rates unchanged, as we had anticipated, flagging elevated underlying price growth and trade-related upside risks to inflation. While this is not the end of BoC easing in our view, we do see the bar to further cuts being higher than markets appreciate, stemming from the Governing Council’s wish to gather more information, and a bias to leave rates unchanged absent further clarity."

DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS

"I would say this was pretty much right down the middle of the plate. I don't see any major surprises in the statement. First of all, it's quite factual. But I also believe that the logic behind the bank staying on hold pretty much fits with where I believe the market was and certainly where we were. And that's a combination of the fact that core inflation has been surprisingly sturdy and the overall economy has held up a bit better than expected. ... Like us, they remain highly concerned about the jobs picture, but clearly things haven't weakened enough to prompt the bank to continue cutting at this point. ... We still expect further rate cuts. We think, as does the bank, we expect growth to weaken markedly in the next couple of quarters. We think that'll show up in spending and employment. And so we continue to think ultimately the bank rates going down to 2%. It may take some time, though."

DARCY BRIGGS, PORTFOLIO MANAGER, FRANKLIN TEMPLETON CANADA

"The market was priced for no cut, so the bank took the free pass. If you read the press release not much has really changed. They have highlighted high degrees of uncertainty and noted that there was strength in the first quarter that came from inventory builds, front-running tariffs, all that kind of activity and basically acknowledged that the economy was expected to be quite a bit weaker in the second half of the year, which coincides with our view too ... The economy is going to hit an air pocket."

"They will be active (in cutting rates) in the second half of the year, most likely ... I think they're waiting to see how the growth profile shapes up."