Bank of Canada: On hold

DAVID BERMAN Globe and Mail Update

Posted on Tuesday, December 7, 2010 11:08AM EST

The Bank of Canada left its key interest rate unchanged, at 1 per cent, on Tuesday morning. The decision was widely expected by economists, who don’t see the bank resuming its rate hiking campaign until the middle of next year. Here are a few comments from economists.

Paul-André Pinsonnault, senior fixed income economist, National Bank: “The BoC is putting particular emphasis on sovereign debt concerns in Europe that could trigger renewed strains on financial markets and impair economic activity. With respect to Canada, most of the downside risks remain external. Although domestic demand remains well supported by considerable monetary stimulus, the BoC remains cautious in the face of the lackluster performance of real exports and the persistent strength of the Canadian dollar at a time where domestic demand growth in the U.S. is only picking up slowly and growth in emerging markets has begun to ease.”

Diana Petramala, economist, Toronto-Dominion Bank: “The reference to the lofty Canadian dollar solidifies the view that Canadian interest rates can rise only so far above U.S. interest rates – something Governor Mark Carney has been communicating for some time now. Given the uncertainties facing the global and Canadian economic outlook, the Bank of Canada will likely want to maintain its ‘stand pa’ position.”

Michael Gregory, senior economist, BMO Nesbitt Burns: “Interestingly, there was very little comment on the U.S. economy apart from the generic: ‘As anticipated, private domestic demand in the United States is picking up slowly.’ This was a key catalyst for the policy pause in the first place, so the limited discussion is a bit of an eyebrow raiser.”

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