The Bank of Canada opted to maintain interest rates on Wednesday, peering out at global uncertainty from a relatively healthy Canadian economy, but it warned Alberta is still adjusting to its new reality.
The province still hasn’t fully recovered from the steep drop in the price of oil and is losing ground to the rest of the country, where most markers show strength, according to the bank.
“Even as the savings rate has been edging higher, high energy producing regions continue to struggle as the full adjustment to the decline in oil prices back in 2015 is not yet complete and transportation constraints are making the situation worse,” Bank of Canada governor Stephen Poloz said.
“The strong labour market points to sources of growth such as information technology and other professional services, tourism, education, health care, financial services.”
Poloz did say Alberta is expected to rebound next year as the adjustments to the price crash take hold.
The bank warned that the recent Alberta budget could weigh on national economic growth due to the “lower spending profile.”
Still, despite continued rates of high unemployment in energy dependent regions and a housing market in Alberta that’s still adjusting to the new reality, there is hope from the central bank.
“At the same time, there’s also signs of stabilizing,” said Carolyn Wilkins, senior deputy governor of the bank.
“It’s a pretty difficult adjustment, but we’re happy to see that at least on the wage side that wage growth picked up overall in Canada and wage growth in those particular regions has has also picked up to kind of meet the Canadian average.”
Wilkins said with new capacity coming online, including from Enbridge’s Line 3 pipeline, energy investment is expected to stabilize after plummeting from 30 per cent of Canadian GDP to 15 per cent.
The bank maintained its interest rate at 1.75 per cent.