The sudden drop in the price of crude, a rise in housing market risk and the quickening U.S. recovery are among new and conflicting economic forces complicating the Bank of Canada's interest rate decision-making.
The central bank left its benchmark overnight lending rate unchanged at 1 per cent on Wednesday, extending to more than four years its longest interest-rate freeze since the 1950s.
The bank pointedly dropped the word "neutral" – a hallmark of interest-rate statements for the past year – even while saying that inflation risks remain "roughly balanced."
This comes after Bank of Canada Governor Stephen Poloz said recently that he wants to move away from explicitly committing to future changes to its key rate.
"There will no doubt come a day when we offer forward guidance again, but not this day," Mr. Poloz said in what were to have been his opening remarks at a post-announcement news conference in Ottawa.
The central bank cancelled the news conference, as well as a planned appearance before the House of Commons finance committee, after a shooting incident forced a lengthy lockdown of Parliament Hill and most surrounding buildings. Mr. Poloz and senior deputy Governor Carolyn Wilkins are still due to testify Thursday before the Senate banking committee.
The central bank may have abandoned the word "neutral," but it is still in the "very essence of neutral" mode, Bank of Montreal chief economist Douglas Porter said.
"For every negative, there's a positive," Mr. Porter said. "For every fading concern, there's an emerging risk. In other words, the bank's main point is that it feels zero urgency to do anything with rates, either up or down."
The most significant shift in the bank's latest economic forecast centred on inflation, where the bank said the patchy global economy is pushing some prices up, while depressing others. There is strong growth in the U.S., but the central bank downgraded its global forecast due to weakness virtually everywhere else.
"Growth prospects are diverging across regions," the bank said in its rate announcement. "Persistent headwinds continue to buffet most economies and growth remains highly reliant in exceptional policy stimulus."
The bank also expressed fresh concerns about rising consumer debt and hot housing markets in some areas, particularly in Toronto, Calgary and Vancouver.
"Financial stability risks associated with household imbalances are edging higher," the bank warned in its statement.
The statement and a separate monetary policy report painted a very mixed picture for the Canadian and global economies.
And the bank has now pushed back its estimate of when the Canadian economy would get back to full productive capacity to the "second half of 2016" from "mid-2016."
The strong U.S. recovery is good news for long-suffering Canadian manufacturers, which are benefiting from both a lower Canadian dollar and stronger demand for exports.
But that isn't yet translating into higher business investment.
And stalled growth virtually everywhere else in the world means less demand and lower prices for oil and the other major commodities that Canada exports in massive volumes. The price of Brent crude, for example, has sunk to roughly $85 (U.S.) a barrel from $111 a barrel as recently as June.
Lower crude prices will cut into Canadians' incomes and "weigh" on household and business spending, according to the report.
The bank acknowledged, however, that core inflation, which strips out volatile energy and food prices, "rose more rapidly" than it expected in recent months. It now expects core inflation to hover around its 2-per-cent target for overall inflation for the remainder of this year and throughout 2015.
Core inflation will hit a 2.1-per-cent annual rate in the final three months of this year, up from its previous forecast of 1.8 per cent, and 1.9 per cent in the first quarter of 2015, up from its earlier estimate of 1.6 per cent, according to the bank's latest forecast.
Uneven global growth is having the opposite effect on overall inflation. The bank said the recent slide in energy prices would sap inflation pressures in the months ahead, leaving the rate well below the target through all of next year, after exceeding that level in the last half of this year.
Most economists don't expect the central bank to start raising rates until at least the second half of next year.
"The Bank of Canada has decided to say less about where rates are headed but isn't saying anything really that different about the upcoming trajectory for growth and inflation," CIBC World Markets economist Avery Shenfeld said.