Once again, the Bank of Canada announced no change to their target rate of 1%. The rate has been unchanged since September 2010 and there is anticipation that rates won't change for another while. This leaves the prime rate unchanged at 3%.
Read the article: BoC keeps interest rate at 1 per cent, says economic conditions worsened
Source: The Canadian Press, CTV News
OTTAWA - The Bank of Canada kept its main interest rate on hold at 1% on Wednesday, as expected, and said the risks of low inflation loom as large as ever, though prices have been rising faster than it had anticipated.
The central bank also flagged weaker-than-expected global growth and the possibility of slightly less underlying momentum in the United States and noted that the Canadian economy grew only modestly in the first quarter.
Economists had been watching to see if higher inflation readings in April might cause Governor Stephen Poloz to tone down his concern about low inflation, but this did not appear to be the case.
"Weighing recent higher inflation readings against slightly increased risks to economic growth leaves the downside risks to the inflation outlook as important as before. At the same time, the risks associated with household imbalances remain elevated," the bank said in its policy statement.
Analysts surveyed in a Reuters poll last week unanimously expected the central bank to keep its overnight interest rate on hold, as it has since September 2010. The median forecast was that the bank will not opt for a rate increase until the third quarter of 2015.
Total inflation in Canada rose to the bank's 2% target in April, but the bank attributed that largely to temporary effects such as exchange rate moves and costlier energy.
Core inflation, which excludes volatile elements, remained "significantly below 2%" in April although it had drifted up, in part due to past exchange rate movements, the bank added.
The lower Canadian dollar and strengthening foreign demand should lead to a pickup in exports, the bank said, and improved corporate profits should boost business investment.
Despite concluding that household debt remained high, the bank said: "There are continued signs of a soft landing in the housing market and a constructive evolution of household imbalances."
The bank said it still expected excess supply in the economy "to be absorbed gradually as the fundamental drivers of growth and inflation in Canada strengthen."
The Bank of Canada's next rate decision is on July 16.