Bank of Canada Holds the Prime Rate Steady

Bank of Canada To Keep Interest Rates Unchanged

Vancouver — My Mortgage BC.com - 03 Sept - The Bank of Canada stuck to its guns on interest rates Wednesday, holding the overnight rate at three per cent despite acknowledging that both inflation and the economy are weaker than previously projected.

The central bank's decision to stay on the sidelines for the third consecutive announcement date had been widely predicted.

"There is absolutely no signal here whatsoever they are preparing to cut rates (in the future)."
Scotia Capital economist Derek Holt, who had urged the bank to lower its key interest rate to spur borrowing and boost the economy, was even more blunt, calling Carney's language on the economy as bordering on the "Pollyannish."

With a federal election call expected later this week, the bank may not have wanted to send a strong signal about downside risks to growth, he said.

The market's reaction, boosting the Canadian dollar almost a cent to 94.54 cent U.S. in early trading, was an indication many expected a clearer signal from Carney on future interest rate cuts.

Inflation currently stands at 3.4 per cent.

The bank said the economy remains vulnerable to U.S. weakness and tight credit conditions that could further drag down demand for Canadian exports.
"Given these developments, the bank judges that the current level of the target for the overnight rate remains appropriately accommodative," it said.
Porter said the bank may feel that having chopped 1.5 percentage points from the overnight rate since December, it has cut interest rates deep enough.

The Bank of Canada's next interest rate decision will be Oct. 21.

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