Bank of Canada Maintains Overnight Rate Target at 0.50%

March 1, 2017

As at¬†the European Central Bank, official at the Bank of Canada are “looking thought the effects” of higher energy prices on inflation, which they expect to be temporary. A statement released after this year’s second of eight scheduled policy reviews, notes that multiple measures of core inflation point “to material excess” in Canada’s economy and notes that “subdued¬†growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States.” Although real GDP last quarter appears to have exceeded its expectations slightly, the policy stance is still considered “appropriate.” The last changes in the overnight rate target were a pair of 25-basis point cuts in January and July of 2015. The next Board meeting on April 12 will include an updated Monetary Policy Report including risks to the projection.

A separate Canadian release today showed that the 2016 current account deficit of C$ 67.695 billion was almost identical to that of C$ 67.552 billion in 2015 due to a slightly larger merchandise trade shortfall that offset a slightly smaller deficit on net services. The trade balance improved sharply in the second half of 2016 to a C$ 793 million surplus in 4Q from deficits of C$ 11.3 billion in 2Q and C$ 8.6 billion in 3Q.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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