Update on the Interest Rate...

(March 01, 2011 )

Today the Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent.
The global economic recovery is proceeding broadly in line with the Bank’s expectation, although risks remain elevated.  U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies.  The pace of the European economic recovery is buoyed down by the state of the balance sheets of the Banks and this is a significant source of uncertainty to the global outlook.
Conversely, the pace of economic recovery in Canada is proceeding slightly faster than expected with consumption growth remaining strong, signs that household spending is moving more in line with the growth in household incomes and with business investment continuing to expand rapidly. The BOC mentions that the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance will continue to challenge the export sector of the Canadian economy even though there is early evidence of a recovery in net exports.
The good news is that inflation in Canada has been consistent with the Bank's expectations whilst global inflationary pressures are rising.
Against this backdrop, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada.
The next scheduled date for announcing the overnight rate target is 12 April 2011.