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Warning of uncertainties

The Bank of Canada is holding its trend-setting interest rate at 0.5 per cent — but it's keeping a watchful eye on "significant uncertainties" that it warns could alter the economy's improving trajectory.

The central bank's scheduled rate announcement Wednesday arrived as Canada tries to assess the direction of U.S. economic policy under President Donald Trump and the potential fallout from any changes he may bring.

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

In an unusually short statement Wednesday, the Bank of Canada used slightly stronger language when referring to U.S. uncertainties than it did in the news release that accompanied its last rate announcement on Jan. 18.

In explaining the decision by governor Stephen Poloz's council to stick with the current interest rate, the bank said that improvements seen in recent 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 of Canada has yet to factor in the full range of economic policies expected under Trump.

On Wednesday, Finance Minister Bill Morneau will meet 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.



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