Bank of Canada: Policy Still on Hold

December 3, 2014

Canada’s overnight target interest rate was last changed in September 2010 when such was raised to 1.0% from 0.75%.  The last of eight scheduled policy announcements in 2014 states that Canada’s output gap, a gauge of unutilized productive resources, is smaller than had been estimated in the last quarterly Monetary Policy Report released in October.  Inflation has risen faster than officials were expecting, but the recent steep decline in oil costs creates doubt over how inflation will behave in the future.  Core inflation, moreover, remains below the 2.0% target, and labor is not fully utilized yet.  All in all, officials find the current accommodative policy stance to be still appropriate.  The effects of Canadian dollar depreciation, recent fiscal measures, and household imbalances will continue to be monitored.

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



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