Bank of Canada Keeps Key Interest Rate at 1 Percent

Mark Carney, governor of the Bank of Canada, kept the target for the overnight rate at 1 percent on March 6 and noted that this rate will likely remain “appropriate” for some time, indicating that other interest rates such as those for consumer loans and mortgages will also likely not go up in the near future. (THE CANADIAN PRESS/Sean Kilpatrick)

The Bank of Canada announced Wednesday that it is maintaining its trendsetting interest rate at 1 percent, the level where it has been for over two years, and suggested that this key policy rate that influences borrowing costs at banks “will likely remain appropriate for a period of time.”

According to Statistics Canada figures released March 1, Canada’s gross domestic product (GDP) expanded only 1.8 percent in 2012 after growing 2.6 percent in 2011.

This measure of the country’s total output of goods and services grew only 0.6 percent in the fourth quarter of 2012 as expressed at annual rates, although it is greater than that of the U.S. at 0.1 percent for the same period.

“The Bank expects growth in Canada to pick up through 2013, supported by modest growth in household spending combined with a recovery in exports and solid business investment,” said the Bank of Canada in a statement.

According to the January 2013 Monetary Policy Report (MPR), following an estimated 1.9 percent in 2012, the Canadian economy is expected to grow by 2 percent in 2013 and 2.7 percent in 2014, and to reach full capacity in the second half of 2014, later than predicted in the October MPR.

The next scheduled date is April 17 for announcing the overnight rate target and publishing the next MPR full update of the bank’s outlook for the economy and inflation.