Canada: Bank of Canada leaves policy rate unchanged again
May 3, 2014
At its 5 March monetary policy meeting, the Bank of Canada (BoC) left the overnight target rate unchanged at 1.00%, a decision that was in line with market expectations. Monetary authorities have left the rate unchanged since September 2010. According to the Central Bank, “the fundamental drivers of growth and inflation in Canada continue to strengthen as anticipated.” However, the Bank explained that excessive supply in the economy and high competition in the retail sector continue to limit inflation. Moreover, inflation is expected to stay well below the 2.0% target for the rest of the year and the, “downside risks to inflation remain important.” In terms of growth, the Bank noted that economic growth in Q4 was slightly stronger than anticipated. The Bank added that exports have picked up but continue to underperform and business investment has yet to gain momentum. Recent data suggest a soft recovery in the housing market as well as steady stabilization of household debt ratios. The Bank perceives that the current monetary policy stance is appropriate given the balance of risks in the economy and therefore decided to maintain is target rate unchanged. Any changes to the policy rate in the future will depend upon new developments in the economy and, “how new information influences this balance of risks.” FocusEconomics Consensus Forecast panelists see the policy rate at 1.03% at the end of 2014. For 2015, panelists expect the policy rate to rise to 1.76%.
Author: Carl Kelly, Economist