The overnight rate will once again remain at 1% – the same level it has been since September 2010 – the Bank of Canada announced June 4.
The Canadian economy saw a “modest” increase in 2014’s first quarter. This was constrained by supply issues and severe weather.
“The ingredients for a pickup in exports remain in place, including the lower Canadian dollar and an anticipated strengthening of foreign demand,” the Bank of Canada said in a release.
“Improved corporate profits, especially in exchange rate-sensitive sectors, should also support higher business investment in the coming quarters.”
Total CPI inflation has moved closer to the 2% target; this increase occurred sooner than the bank said it would in its last rate announcement. The growth was due in part to higher energy prices, but this is expected to be temporary.
Core inflation has remained below well the 2% target rate, although some growth was seen since the last rate announcement. The bank said this is due to past exchange rate movements.
Once again, the bank said it expects there will be a soft landing in the housing market, and a “constructive evolution” of household imbalances.
“The bank judges that the balance of risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1%,” the bank said in its announcement.
“The timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks.”
Globally, economic growth in Q1 2014 was weaker than expected, as downside risks have increased slightly due to recent developments, the bank said. The economy in the United States is rebounding after a slowdown in the first quarter, but growth is expected to be lower than previously anticipated.
The Canadian dollar had slipped to $0.915 US prior to the rate announcement due to the federal government’s announcement of an unexpected trade deficit in April. The dollar fell further, to $0.913, when the overnight rate was announced.
The Bank of Canada will make its next rate decision announcement on July 16.
