LONDON (Reuters) - Faced with a still-uncertain outlook for Canada's future trade arrangements with the United States, the Bank of Canada is likely to leave interest rates unchanged at its Sept 5 meeting, according to a Reuters poll of economists published Friday.
Only one economist of 31 polled by Reuters Aug 29-31 forecast a 25 basis point rise to 1.75 percent at the Bank's policy-setting meeting on Wednesday. That comes despite evidence the economy is broadly performing well, expanding at its fastest pace in a year in the second quarter.
The BOC has raised rates twice this year, in January and May, bringing is policy rate to 1.50 percent from 1.00 percent <CABOCR=ECI>. Most who have a view on the next rate rise say it will likely come at the Bank's October meeting, while a handful of others say Governor Stephen Poloz and other policymakers won't raise rates again until early 2019.
U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland resumed talks on Friday on revamping the North American Free Trade Agreement (NAFTA), but they appeared to stumble over concessions on agriculture and a mechanism for dispute resolution.
U.S. President Donald Trump had set a Friday deadline for the talks to conclude.
"The Bank has incorporated a drag on economic growth from trade policy uncertainty that kept the level of GDP about half a point lower than it would otherwise have been by the end of 2020. To the extent that this uncertainty is lifted, a stronger forecast will be the result, and this can lead to a quicker pace of monetary tightening," economists at TD wrote to clients earlier this week in a note.
"While progress on negotiations will be welcomed by Governor Poloz and company, we do not expect any significant change in the path of monetary policy or the communication thereof at this juncture."
(Polling by Kailash Mohan Bathija and Indradip Ghosh; Editing by Dan Burns and Chizu Nomiyama)