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Bank of Canada keeps rates unchanged amid trade uncertainty

The Bank of Canada, or BOC, maintained its target for the overnight rate at 1.25%, as it cited increasing economic uncertainty due to changes in international trade policies.

The bank rate and deposit rate were left unchanged at 1.5% and 1.0%, respectively, said the central bank, which raised the rates in January.

"Global growth remains solid and broad-based … However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks," the BOC explained.

In 2017, the Canadian economy grew by 3%, consistent with the BOC's estimate in January. Economic growth was slower than expected in the fourth quarter amid higher imports and a partial recovery of exports.

The BOC said inflation is moving close to its 2% target, while core inflation has increased, in line with an economy operating near capacity.

On employment, the bank said wage growth has firmed, but remains lower than the level usually seen in an economy with no labor slack.

While its economic outlook would warrant higher interest rates over time, the bank said some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target.

On the trade front, U.S. President Donald Trump recently announced additional duties on steel and aluminum imports, which are expected to hurt the Canadian industry. In addition, the two countries and Mexico are renegotiating the North American Free Trade Agreement.

The Canadian government has said the new U.S. restrictions on steel and aluminum are "absolutely unacceptable" and threatened "responsive measures."