Bank of Canada Holds Rates Again!

 The Bank of Canada is keeping its benchmark lending rate at a record low of 0.25 per cent, reiterating on Tuesday its conditional commitment to hold rates steady until the middle of this year. Although it held the overnight lending rate steady, the bank acknowledged the recovery appears to be proceeding at a better pace than it had anticipated. "The level of economic activity in Canada has been slightly higher than the bank had projected in its January Monetary Policy Report," the bank said in announcing the rate decision. "Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target." The Canadian economy grew at a strong five per cent pace in the fourth quarter, Statistics Canada reported Monday. Robust growth like that makes it likely that the bank will move to hike rates and rein in inflation sooner rather than later. After shrinking by 2.6 per cent in 2009, the bank projects that the economy will grow by 2.9 per cent in 2010 and 3.5 per cent in 2011. In its statement, the bank repeated its mild concern over the risk that the elevated Canadian dollar presents to the recovery. "On the downside, the main risks are a more protracted global recovery and persistent strength of the Canadian dollar," the bank said. It is set to release its next decision on interest rates on April 20.

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David Giovanniello

David Giovanniello

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CENTURY 21 First Canadian Corp., Brokerage*
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