Bank of Canada Holds the Overnight Rate at 0.5%

The Bank of Canada met market expectations and maintained the overnight rate at 0.5%. With the economic and inflation outlook evolving in line with the Bank’s expectations, “the current stance of monetary policy remains appropriate.”

The Bank still anticipates that the economy will grow at 2.0% in 2016 and 2.5% in 2017, faster than 2015’s 1.1% pace. The Bank now expects the economy to return to full potential “around mid-2017,” which is a slight change from “in the first half of 2017” as indicated in July. The lower profile for commodity prices also resulted in the Bank lowering its forecast for the headline consumer price index (CPI) rate throughout 2016, although both the headline and core measures are still expected to return to 2.0% in 2017.

The updated 2016 forecast showed the effects of a lower assumed price for oil during the forecast horizon, with business fixed investment now anticipated to act as a weight on growth again next year. The Bank’s custom is to assume oil prices remain around current levels, and accordingly, it is looking for prices to be $15 to $20 lower than embedded in its July forecast.

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Information courtesy of Dawn Desjardins, Assistant Chief Economist, RBC Economics. Full article available here

Image courtesy of RBC Financial



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