OTTAWA—The Bank of Canada left the overnight rate target at 0.75 percent on Wednesday as it noted that the negative effects of the oil price shock are being mitigated by lower interest rates and currency after the Jan. 21 rate cut.
The broad message is one of steady as she goes. The Canadian economy is evolving according to expectations set out on Jan. 21 when the Bank released its economic projections in its monetary policy report.
“At present, we judge that the current degree of monetary policy stimulus is still appropriate,” said the Bank of Canada in its statement.
The loonie, which was trading just below US$0.80 prior to the announcement at 10 a.m., pushed above that level and the two-year bond yield moved higher by almost 0.15 percent (15 basis points) reflecting the less dovish statement.
Economic data has generally been stronger since Jan. 21 and the price of oil seems to have found some stability with West Texas Intermediate trading around US$50 a barrel and Brent trading around US$60 a barrel—close to the central bank’s assumptions.
On Tuesday, March 3, Statistics Canada reported that GDP grew at a 2.4 percent annualized rate in the last quarter of 2014. This was better than what analysts expected (2.0 percent), and is basically in line with the 2.5 percent forecast by the central bank on Jan. 21.
