Bank of Canada Maintains Policy Stance

June 4, 2014

Canada’s overnight interest rate target will remain at 1.0%, the level since a 25-basis point hike in September 2010.  A statement from officials observed weaker growth in the first quarter than was anticipated but higher total CPI inflation, too, which was caused by elevated energy costs and a weaker C-dollar.  In the statement, officials attach greater downside risk to growth and assert that “downside risks to the inflation outlook are as important as before” despite the the quicker rise of total inflation to 2%.  Core inflation, moreover, remains “significantly below 2%,” and excess supply will be absorbed only gradually. Statements since October have left both the timing and direction of the next interest rate change dependent on future data.  Previously, the next rate move had been specified as an increase.  The Great Recession low was a 0.25% overnight target interest rate.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.