Canada: Bank of Canada keeps overnight rate unchanged
March 4, 2015
At its 4 March monetary policy meeting, the Bank of Canada (BoC) kept the overnight target rate at 0.75%. The decision was expected by the markets. The Bank had reduced its overnight target rate by 25 basis points in a surprise move at its 21 January meeting thus bringing the rate at its lowest level since September 2010.
The BoC commented that economic performance in the last quarter of 2014 was broadly in line with the Bank’s expectations. Lower oil prices had a modest impact on aggregate demand. However, a more pronounced negative effect is expected to be manifested in the first quarter of 2015. The Bank added that, “data for 2014 as a whole suggest the anticipated rotation into stronger growth in non-energy exports and investment is well underway.”
Regarding price developments, the BoC said that inflation has fallen as expected, largely reflecting the dramatic drop in oil prices. However, core inflation remains broadly stable around 2.0% as it continues to be boosted by the pass-through effects of the weaker currency.
Author: Dirina Mançellari, Senior Economist