Rate cut or rate hike? The minutes of the central bank meeting show a high degree of uncertainty in the direction of policy adjustment.

Canadian central bank officials unanimously agreed earlier this month to keep the overnight rate unchanged at 2.25%, but there is still a high degree of uncertainty internally about the direction of the next policy adjustment, whether it will be another rate cut or a hike. According to the minutes of the December 10 rate decision meeting released by the Bank of Canada on Tuesday, policymakers noted that the current "highly uncertain environment" makes it "difficult to forecast the timing and direction of the next policy rate adjustment." The central bank reiterated that it is prepared to respond at any time if there are significant changes in economic activity or inflation outlook. Minutes show that the Bank's Governing Council, consisting of seven members, also discussed the impact of the USMCA agreement on the Canadian economy. Bank officials believe that if the trade agreement were to collapse, it would severely impact the Canadian economy; however, progress in the negotiations could provide some stability to North American trade policy and boost business investment. On the macroeconomic data front, the central bank pointed out that recent quarterly Gross Domestic Product (GDP) data has been volatile, highlighting the challenges in assessing the economy's underlying trend. Officials expect weak performance in the fourth quarter, with growth in consumption, real estate activity, and government spending partially offsetting the drag from soft business investment and net exports. The latest preliminary data shows a slight increase in Canada's GDP in November, reversing the contraction seen in October. However, the central bank believes that overall economic growth may still be negative at the quarterly level. Analysts point out that the Bank of Canada is currently in a "wait-and-see mode," with the country's domestic economic momentum weak and uncertainty rising in the external trade environment. The future path of monetary policy will still heavily depend on data performance and progress in North American trade negotiations.