Bank of Canada says U.S. trade uncertainty hitting economy

[February 06, 2019]   OTTAWA, (Reuters) - Uncertainty over U.S. trade policies is holding back Canadian business investment despite strong economic fundamentals, a deputy governor of the Bank of Canada said on Wednesday.

Timothy Lane also pointed to lower oil prices and a softening housing market as factors hindering growth, in contrast to the U.S. economy, which is powering ahead on the effects of stimulus.

"The past year has seen an important change in the relative performance of the two economies, despite the fact that the Canadian economy is generally in a good place," Lane said in a speech on foreign reserves management to a gathering of economists in Washington, D.C.

He noted the bank had raised interest rates by a cumulative 1.25 percentage points since July 2017, but did not address whether or not future hikes would be needed. The central bank stayed on the sidelines on Jan. 9 and market traders expect it to hold rates steady once again on March 6.

Lane said the lower business investment, falling oil prices and softer housing market, coupled with U.S. interest rate hikes, was putting downward pressure on the Canadian dollar. This would help support the economy through the period of slower growth, he added.

(Reporting by David Ljunggren and Julie Gordon)

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