Bank of Canada keeps interest rate at 1%
Posted: Dec 04, 2013 10:27 AM ET
The Bank of Canada kept its benchmark interest rate at one per cent on Wednesday.
That's the rate on which other retail banks base their rates for savers and borrowers.
The rate, known as the target for the overnight rate, sets the terms at which banks can borrow from the central bank and each other for short-term loans.
'The Bank continues to expect a soft landing in the housing market.'- Bank of Canada, in its rate decision
The rate has been at that level for more than three years, dating back to September 2010. The bank meets every six weeks to decide on interest rates, and has now decided to leave the rate unchanged for 26 consecutive meetings — its longest stretch of inaction ever.
Broadly, the bank lowers the rate when it wants to stimulate the economy, and raises it when it wants to slow down growth.
"The Bank continues to expect a soft landing in the housing market," the bank said in a statement announcing its decision. "The downside risks to inflation appear to be greater," it added.
The language of the statement is a sign the central bank is leading toward cutting rates, not raising them.
The dollar, which has been trending steadily lower in recent weeks, lost another third of a cent following the news. The loonie is now at 93.66 cents US, its lowest level in more than three years, dating back to May 2010.
BMO economist Doug Porter suggested the bank is just fine with that, as it has repeatedly scaled back its talk of raising rates in recent policy meetings.
"I would almost think, if I didn't know better, there's a drive here to push the Canadian dollar even lower," Porter said. "Let's just say they are not unhappy about the weakness of the currency."
Andrew Pyle, wealth advisor for Scotia Capital, says Poloz’s style as Bank of Canada governor is notable for this focus on the currency, and the lack of inflation in the Canadian economy.
"The export pie is not growing as fast as Canada needs it – one way around that is get a cheaper currency. I think the Bank of Canada wants the dollar down around 90 cents," he said in an interview with CBC's Lang & O'Leary Exchange.