BoC holds rates amid ‘economic slack’
The Bank of Canada is holding its benchmark overnight interest rate at 0.5 per cent as it says Canada faces “persistent economic slack.”
The decision to hold rates was hardly a surprise. Ahead of Wednesday’s decision, 20 economists and analysts surveyed by Bloomberg News unanimously predicted Canada’s central bank would not change its trendsetting interest rate.
Canada experienced a surprising jump in inflation in January, but the Bank of Canada attributes this to the short-term impact of new carbon pricing measures in Ontario and Alberta. Take that temporary blip out of the mix, and the central bank said it continues to see “material excess capacity in the economy.”
The bank’s last interest rate decision, released Jan. 18, made note of global uncertainty, and Bank of Canada governor Stephen Poloz told reporters at the time that enough potential downside risks were present in the economy for a future rate cut to be “on the table.”
Some Canadian economic data has improved since then, but the brief statement for Wednesday’s decision is unlikely to spark any expectation the bank will hike rates soon.
“Today’s statement provides further confirmation of our view that the Bank of Canada will not be taking its foot off the accelerator,” said Brian DePratto, senior economist with TD Economics. “Over the near term, given the still significant economic uncertainties, particularly beyond Canada’s borders, we continue to see the risks to monetary policy as tilted toward further easing.”
Benjamin Reitzes, senior economist with BMO Capital Markets, described the statement as nothing but a placeholder until the bank releases its next Monetary Policy Report on April 12.