Bank of Canada

May 25, 2016

The Canadian central bank overnight interest rate target was left unchanged as expected.  It’s been 0.50% since the second of two 25-basis point cuts last July.  The first one was done in January, and those were the only changes since a trio of consecutive tightenings in June, July and September of 2010.  A statement explaining today’s decision calls the current policy stance still “appropriate” and says that inflation and the external value of the Canadian currency are currently close to levels assumed in the April Monetary Policy Report.  Second-quarter GDP growth will be considerably slower than had been assumed, since the wildfires near Fort McMurray, Alberta likely depressed the pace by 1.25 percentage points.  Growth will recover in the summer as energy production returns to near normal and reconstruction from the fire damages occurs.  Inflation risks are considered balanced.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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