The overnight rate target will remain at 1%, the Bank of Canada announced this morning, keeping the interest rate at the same level it has been since September 2010.
This is the first interest rate decision by Stephen Poloz, who took the reins as central bank governor in June.
The BoC said the inflation outlook will remain “muted” as long as there is significant slack in the Canadian economy.
“In Canada, economic growth is expected to be choppy in the near term, owing to unusual temporary factors,” said a BoC statement, which went on to explain that the overall outlook is little changed since the central bank’s projection in April. “Annual GDP growth is projected to average 1.8 per cent in 2013 and 2.7 per cent in both 2014 and 2015, supported by very accommodative financial conditions.
“Despite ongoing competitiveness challenges, exports are projected to gather momentum, which should boost confidence and lead to increasingly solid growth in business investment.”
Douglas Porter, BMO chief economist and managing director for economic research, said, “We continue to believe that the next move in rates by the bank is at least a year away – we have pencilled in 2014 Q3 for a restart date for tightening, and recognize that the risks are pretty one-sided that it could well be later, but unlikely to be earlier.
“The bank’s three conditions – degree of slack, core inflation and household debt – will provide the guideposts on any changes in timing.”
