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Bank of Canada Maintains One Percent Target Rate – Global financial conditions “very stimulative”

In its latest decision on interest rates, the Bank of Canada is maintaining the overnight lending rate at a target of 1.0%.

Global economic growth and inflation in Canada have recently been in line with the Bank’s expectations. While economic recovery in Europe has suffered amid ongoing conflict in Ukraine, the U.S. has seen its recovery continue. Additionally, the Bank noted that it sees global financial conditions as “very stimulative”.

Gross Domestic Product (GDP)

Gross Domestic Product (GDP) growth in Canada has been strong, as anticipated, over the second quarter. Exports have been aided by depreciation in the Canadian Dollar coupled with strong U.S. investment spending. The housing market continued to push past expectations. The BoC’s longer-term expectation remains for excess capacity in the economy to be absorbed over the next two years.

Inflation

Inflation remains close to the Bank’s 2% target. It attributes growing inflation at the beginning of the year to a number of temporary factors such as higher energy prices, exchange rate pass-through and sector-specific factors. The Bank also added that “the risks to the outlook for inflation remain roughly balanced” despite ongoing household imbalances.

Next Announcement

The next interest rate announcement is scheduled for October 22, 2014.