Canada: Bank of Canada keeps overnight rate unchanged in April
April 15, 2015
At its 15 April monetary policy meeting, the Bank of Canada (BoC) decided to keep the overnight target rate at 0.75% as markets had expected. The Bank deemed that the downside risks to the economy that brought about the rate reduction in January persist, although they are evolving as expected.
The BoC commented that economic performance is estimated to have stalled in the first quarter of 2015, and stated that the oil price shock will have a more short-term effect than previously predicted, although the magnitude of the impact will be broadly in line with the Bank’s expectations. The Bank added that, “(r)eal GDP growth is projected to rebound in the second quarter and subsequently strengthen to average about 2 1/2 per cent on a quarterly basis until the middle of 2016.”
Regarding price developments, the BoC stated that risks to inflation are balanced and core inflation is expected to remain around 2.0%. Canada’s output gap, which widened in the first quarter, continued to put downward pressure on prices, however, this was offset by upward pressure resulting from exchange rate depreciation. The next meeting is scheduled for 27 May.
Author: Robert Hill, Economist