Bank of Canada, BOC, decides to keep interest rates unchanged at 1%.
The central bank has kept rates unchanged since September of last year.
BOC says that even though they left rates unchanged, they would eventually have to lift borrowing costs if economic growth continues.
Here are some highlights from the statement:
- To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2 pct inflation target, it stated. Such reduction would need to be carefully considered.
- It did not say whether eventually meant the next rate increase would be in July, September or beyond, but its previous statements had only said that any future hikes would need to be carefully considered.
- The central bank now sees underlying inflation as only relatively subdued rather than subdued as in previous statements, but it did not change its overall outlook for inflation
- It repeated that the persistent strength of the CAD dollar could create even greater headwinds for the Canadian economy and dampen inflation
According to Doug Porter, Deputy Chief Economist at BMO Capital Markets, It's a subtle change. And I think that's the theme here. They certainly didn't bang us over the head with any obvious changes, but there were a few very subtle shifts in the language.
I do think they are eventually preparing the ground for rate hikes, but there's very little here to suggest that the bank has had a big change of heart. It's likely to be some time yet before they start raising rates.
Prior to interest rate decision, USD/CAD was priced at .9718 before falling to .9660 on the positive comments.