"With peak margin expansion looking like a thing of F2018, loan growth slowing modestly, and loan losses moving higher, Canadian P&C Banking earnings growth was weak for a second consecutive quarter", wrote analyst Robert Sedran.
And although trade tensions cloud the future, inflation is on target, the housing market is stabilizing and the central bank believes the economy appears to be returning to potential growth despite lowered projections. The BoC continue to highlight that global trade conflicts remain the largest risks to the global and domestic outlook, thus this caution has pushed the Canadian Dollar lower.
The BoC left its main interest rate unchanged at 1.75%, as was widely expected. The Fed has signaled a rate cut could come as soon as the end of July due to growing risks to USA economic growth. It would be the first reduction in more than a decade. A material decline in longer-term mortgage rates is supporting housing activity.
She predicted similar growth in both economies by the second half of 2019 - and argued the process is one of "convergence" rather than "divergence".
Fallout from the uncertain worldwide trade environment was also reflected in the bank's updated economic projections, which were also released Wednesday in the bank's quarterly monetary policy report. USA crude oil futures CLc1 settled up 4.5% at $60.43 a barrel.
"Trade conflicts between the United States and China, in particular, are curbing manufacturing activity and business investment and pushing down commodity prices", says the central bank.
"The Bank of Canada will have to decide whether it believes that there's further for this momentum to go", said Mendes, noting that the oil-producing province of Alberta has partially lifted production cutbacks.
Closer to home, direct trade actions are also having an impact on Canada. These include new Chinese trade restrictions on Canadian agricultural goods, the bank said.
Rep hobby margin for the Canadian deepest and industrial operations of Canada's Wide Six banks rose by a median in the second quarter (which ended April 30) of two foundation points over the earlier quarter, and by 5 points over a year earlier, in step with a recent CIBC World Markets file.
The central bank revised its forecast to an annual rate of 2.3 per cent from 1.3 per cent in April. The bank's Wednesday forecast of 1.3 per cent growth for 2019 is just below the average private sector forecast of 1.4 per cent.
He added that any rate cut by the U.S. Federal Reserve at one of its upcoming meetings would be a key development for the Bank of Canada. In addition, climate-related incentive payments from the federal government, which are front-loaded, could also provide a temporary boost to household spending.
The Canadian dollar strengthened against its US counterpart on Monday, with the currency moving closer to last week's eight-month high ahead of an interest rate decision on Wednesday from the Bank of Canada.