The Bank of Canada held its key interest rate at 1.00% on Wednesday, as expected.
The bank added that it will take a more cautious approach to possible rate hikes going forward.
“This less aggressive stance on interest rates partly reflects concerns over NAFTA renegotiations and, to a lesser extent, the stronger Canadian dollar,” David Madani, senior Canadian economist at Capital Economics, said in emailed commentary.
In its accompanying statement, the BoC said that the global and Canadian economies are progressing as outlined earlier this year, and it continues to expect global growth to average around 3.5% over 2017-2019.
However, the bank cautioned that this outlook “remains subject to substantial uncertainty about geopolitical developments and fiscal and trade policies, notably the renegotiation of the North American Free Trade Agreement.”
The US came out swinging during the fourth round of NAFTA re-negotiations, which ended last week, prompting renewed concerns about the agreement collapsing.
The US presented a number of tough proposals, including the addition of a sunset clause, which would lead to NAFTA expiring every five years unelss all three countries agreed to extend it. Mexico and Canada rejected the US' proposals.
Last month, the central bank unexpectedly hiked rates by 25 basis points, citing stronger than expected data.
The Canadian dollar was down by 0.7% at 1.2771 per US dollar at 10:11 a.m. ET.