RTTNews - The Bank of Canada on Thursday announced that it is maintaining its target for the overnight rate at 1/4 per cent, as expected. Policymakers in Ottawa also reiterated a conditional commitment to hold current policy rate until the end of the second quarter of 2010.
The BoC said that information received since the Bank's April Monetary Policy Report (MPR) is broadly consistent with the Bank's medium-term outlook for output and inflation in Canada.
The economy is undergoing major restructuring in a number of sectors. The already significant output gap will continue to widen through the third quarter, putting downward pressure on inflation. The Bank continues to expect that the global and Canadian recoveries will be more muted than usual, said the BoC in its accompanying statement.
According to the BoC, financial conditions and commodity prices have improved significantly, and consumer and business confidence have recovered modestly.
The price of of oil continued to hover near the $70 mark after falling below $40 during the throes of the recent recession. Along with higher commodities prices, the loonie has soared against its US counterpart, rising to C$1.08 for the first time since last fall.
If the unprecedentedly rapid rise in the Canadian dollar (which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency) proves persistent, it could fully offset these positive factors, insisted the BoC.
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