The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and also the deposit rate is 1/4 per cent.
The global economy is progressing largely because the Bank anticipated in its January Monetary Policy Report (MPR). Financial market volatility, reflecting heightened concerns about economic momentum, seems to be abating. Although downside risks remain, the financial institution still expects global growth to bolster this season and next. Recent data indicate that the U.S. expansion remains broadly on track. At the same time, the reduced degree of oil prices continues to dampen growth in Canada along with other energy-producing countries.
Prices of oil along with other commodities have rebounded in recent weeks. In this context, and in light of shifting expectations for monetary policy in Canada and the Usa, the Canadian dollar has appreciated from its recent lows. With one of these movements, both the cost of oil and the exchange rate have averaged near to levels assumed in the January MPR.
Related
- Bank of Canada holds key interest rate
-
-
-
Canada’s GDP growth in your fourth quarter was not as weak as expected, however the near-term outlook for that economy remains broadly the same as in January. National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are responsive to exchange rate movements. However, overall business investment remains very weak because of retrenchment within the resource sector.
Inflation in Canada is beginning to change broadly as anticipated. The factors that pushed total CPI inflation up to 2 percent will likely unwind in the months ahead. Measures of core inflation are at or simply below 2 per cent, boosted by the temporary results of past exchange rate depreciation. Material excess capacity within the Canadian economy will continue to dampen inflation.
An assessment from the impact from the upcoming federal budget’s fiscal measures will be integrated into the Bank’s April projection. All things considered, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities still edge higher, partly due to regional shifts in activity associated with the structural adjustment underway in Canada’s economy. The Bank’s Governing Council judges the overall balance of risks remains inside the zone that the present stance of economic policy is suitable, and also the target for that overnight rate remains at 1/2 per cent.
