The country’s central bank will be maintaining its overnight rate target at 1%, the level it has been for the past four years.
The Bank of Canada said the global economy is performing according to expectations, with the situation in Ukraine contributing to slowed recovery in Europe.
The United States is experiencing a sturdy recovery with increases in business investment driving growth.
“Global financial conditions remain very stimulative and longer-term bond yields have eased even further,” said the bank.
Growth in Canada’s gross domestic product in the second quarter brought levels up to the bank’s projections in July. Exports jumped in the second quarter, driven by U.S. spending, in part offsetting a weak winter.
“While an increasing number of export sectors appear to be turning the corner toward recovery, this pickup will need to be sustained before it will translate into higher business investment and hiring,” the bank said.
Housing market activity has been stronger than expected.
Inflation remains close to the 2% rate target, performing as forecast by the Bank of Canada in July. Temporarily higher energy prices were responsible for previous growth, as was exchange rate pass-through.
Risks to the inflation outlook remain balanced. Household imbalance risks remain at levels seen in July.
“The balance of these risks is still within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1%.”
As far as the next rate announcement, the bank said it is “neutral” in its outlook.
Douglas Porter, chief economist and managing director of economic research for BMO Capital Markets, said the announcement held little surprise.
“While the statement sounded a tad less downbeat than July’s effort, that’s simply a reflection of the obvious – the economy clearly perked up in recent months, pulled along in the slipstream of an improving U.S. backdrop,” he said.
“The overall tone is thus slightly less dovish than recent statements, and appears more firmly neutral.”
Prior to the announcement, the Canadian dollar was sitting at $0.9147 US. As of press time, the dollar had jumped to $0.9180 US.
The next overnight rate target announcement is scheduled for October 22.
