Bank of Canada’s Interest Rate Target Kept at 0.50%

January 18, 2017

The Governing Council retained a 0.5% target interest rate. That’s been the level since reductions of 25 basis points in January 2015 and July 2015. Officials just completed a review quarterly that hardly changed macroeconomic projections last made in October and that concluded that the existing monetary stance is still appropriate. A statement explaining today’s decision notes a recent strengthening of global economic conditions yet undiminished uncertainty and downside risk. Economic growth is projected to settle back from last summer’s robust pace. Canadian business investment and exports of non-energy merchandise exports continue to be disappointing.

Canada’s economic recovery has lagged behind the U.S. business cycle, and the considerable amount of productive slack in Canadian resources is not expected to be completely reabsorbed until the middle of 2018. Total CPI inflation, which has been higher than assumed earlier because of earlier depreciation in the loonie, is expected to fall back to 1.8% in the current quarter.

The Bank of Canada also published a new Monetary Policy Report. Real GDP is projected to expand 2.1% in both 2017 and 2018, close to the top end of the estimated range for the expansion of potential GDP. Officials likewise see total CPI inflation at 2.1% around the end of this year and at the target of 2.0% in the fourth quarter of 2018. Global real GDP is assumed to expand at an average 3.4% per annum over the coming two years.

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



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