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BofC holds rate as inflation fears weigh

January 22, 2014

Bank of Canada Governor Stephen Poloz kept his main interest rate unchanged and said the direction of his next move will depend on the economy's evolution, while predicting that recent weakness in the country's dollar should aid exports. Policy makers kept the benchmark rate on overnight loans between commercial banks at 1%, where it's been since September 2010 , as expected by all 21 economists in a Bloomberg News survey. The bank's updated forecast lifted the outlook for 2014 economic growth to 2.5% from 2.3% and said inflation will be further below target throughout 2014. The Canadian dollar weakened to a fresh four-year low against the greenback after the Bank of Canada statement. The loonie fell to a session low of 90.59 U.S. cents, weaker than Tuesday's close of 91.14 U.S. cents. Canada's dollar has fallen almost 7% since October when Poloz dropped language about the need to raise interest rates. Policy makers reiterated Wednesday the economy is around two years away from full output because company spending and shipments abroad have disappointed.

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Source: Baystreet Economic Commentary (Canada)

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