Canada Monetary Policy


Canada: Central Bank leaves interest rates unchanged for a third consecutive meeting

January 18, 2011

At its meeting on 18 January, the Bank of Canada (BoC) left the target for the overnight rate unchanged at 1.00%, in a move widely anticipated by the market. The decision was made amid an improved outlook for the Canadian economy in 2011 due to better short-term prospects in the United States. However, risks to the economic recovery ?remain elevated?. Policy makers expressed confidence that the ?recovery in Canada is proceeding broadly as anticipated?. However, monetary officials also conveyed concerns about the strength of the Canadian dollar and poor productivity, which limit a full recovery in the external sector and drive the current account deficit to a 20-year high. The Central Bank also confirmed that inflationary pressures ?remain subdued?. As the Central Bank maintained its dovish tone for a third consecutive meeting, further tightening of monetary policy is seen unlikely in the near future, although analysts anticipate interest rate hikes in the second quarter of the year. The next policy meeting is scheduled for 1 March.


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