![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2019\/01\/bank-of-canada.jpg\")
<\/a><\/p>\nPhoto: James Bombales<\/em><\/p>\n The Bank of Canada has stepped to the sidelines since it last hiked the overnight rate, which influences rates on the mortgage market, this past October.<\/p>\n Leaving the policy rate at 1.75 percent since then is a departure from the central bank’s gradual efforts to push interest rates higher: The Bank of Canada has embarked on five consecutive hikes, beginning in July 2017.<\/p>\n Though the bank has not been as aggressive of late as market watchers might have predicted if asked last year, in a report published this week, TD economists Beata Caranci and James Orlando suggest this tempered approach is indeed the right one for the Canadian economy.<\/p>\n\n For the past 10 or so years, they note, Canada has been able to count on the energy sector, housing, or both for economic growth. That isn\u2019t the case today.<\/p>\n \u201cNow we have a situation where both are going through what could be a prolonged adjustment period to a lower level of activity. This warrants a Bank of Canada pause,\u201d reads their co-authored report titled \u201cPatience is a Virtue<\/a>.\u201d<\/p>\n While lower oil prices and pipeline delays have been battering the Canadian economy, until relatively recently housing had picked up the slack. But with Canadian home prices posting their biggest decline since 1995, the economy is now facing another headwind, a situation TD nonetheless expects to clear up in the first half of the year.<\/p>\n \u201cOur expectation is that evidence of housing stabilization and a rebound in the energy sector should become apparent in second quarter data, offering the central bank more confidence to resume its normalization process with interest rates thereafter,\u201d the economists continue, saying the next rate hike is likely to occur in July.<\/p>\n However, TD notes that the data may not show the anticipated uptrends and risks may emerge.<\/p>\n \u201cHousehold leverage and elevated sensitivity to interest rate changes have long been highlighted as the biggest risk to the economy,\u201d the report states.<\/p>\n While TD\u2019s view is generally in line with that of other big banks, there has been increasing speculation that the Bank of Canada may be encouraged to reverse at least one of its recent rate hikes in the event of a prolonged downturn in the housing market.<\/p>\n