OTTAWA—The Bank of Canada held its benchmark interest rate steady on Wednesday and warned that it is keeping a watchful eye on “significant uncertainties” weighing on the outlook for the economy.

The scheduled rate announcement arrived as the central bank tries to assess the direction of U.S. economic policy under U.S. President Donald Trump — and the potential fallout from any policy changes he makes.

The bank has said some U.S. proposals, which include a border tax and protectionist policies, would have “material consequences” for Canadian investment and exports.

Read more:

Trudeau dodges question about Trump’s plan to ‘tweak’ free trade

After Trump meeting, Canadian ambassador ‘cautiously optimistic’ about NAFTA

Donald Trump’s ‘jacked up’ manufacturing push a headache for Canada

In an unusually short statement, the Bank of Canada used strong language when referring to uncertainties, as it did in the news release that accompanied its last rate announcement on Jan. 18.

At that time, two days before Trump’s inauguration, the bank indicated that “uncertainty about the global outlook is undiminished, particularly with respect to policies in the United States.”

On Wednesday, the statement said it was “attentive to the impact of significant uncertainties weighing on the outlook.”

As widely expected, the trend-setting target for the bank’s overnight interest rate stayed at the same level it’s been since July 2015: 0.5 per cent.

In explaining the decision by Governor Stephen Poloz’s council, the bank said improvements seen in recent economic data releases have been consistent with its projections.

The central bank also expects growth in the fourth quarter of 2016 — as measured by real gross domestic product — might come in slightly stronger than predicted because of recent consumption and housing data releases. Statistics Canada is scheduled to release those GDP figures Thursday.

On the downside, however, the bank said Canadian exports continue to face competitiveness challenges while the job market has seen weaker growth in wages and hours worked.

The bank made a point of emphasizing how Canada’s labour market conditions have contrasted with a much-stronger U.S. performance.

This was a way for Poloz to signal that Canada is not at the same point of the economic cycle as the U.S., said TD senior economist Brian DePratto.

DePratto expects the Bank of Canada to keep rates unchanged through 2017 even as the U.S. central bank lifts rates a couple of time over the next year.

Loading... Loading... Loading... Loading... Loading... Loading...

If anything, he said Canadian rates will probably move down before they go up, especially if policy changes made by Trump slow Canada-U.S. trade.

“Anything that dampens that relationship is going to be growth negative here and could potentially mean a Bank of Canada reaction,” said DePratto, adding that interest rate policy divergence would likely weaken the Canadian dollar.

While a weaker currency could help lift growth by encouraging exports, consumers would likely have to pay more for imported goods, like fresh fruit from places like California.

On inflation, the bank said Wednesday that it’s looking past January’s surprisingly robust headline figure of 2.1 per cent. It said the number was a result of a temporary jump caused by higher energy prices that were largely tied to the implementation of carbon-pricing policies in Ontario and Alberta.

The Bank of Canada made its rate decision amid ongoing uncertainty surrounding the policy agenda of the country’s largest trading partner.

Analysts were hoping to learn more about the bank’s thinking when it comes to potential U.S. policy changes, but the brief statement offered few details.

The Bank of Canada has yet to factor in the full range of economic policies expected under Trump in its projections.

Trump has pushed for the renegotiation of the North American Free Trade Agreement, though he has said the changes to the deal would only involve “tweaking.”

The U.S. proposals have created significant concerns within Corporate Canada and for the federal government.

On Wednesday, Finance Minister Bill Morneau met his new U.S. counterpart, Treasury Secretary Steven Mnuchin, for the first time. Morneau and the federal government have been trying to figure out Trump’s plans and how they may affect Canada.

Read more about: