Originally Published on March 5, 2014, for Xinhua News Agency
TORONTO, March 5 (Xinhua) – Canada’s Central Bank on Wednesday announced it will keep benchmark interest rate at one per cent, where it has stayed since September 2010.
Both the Consumer Price Index and core inflation in Canada are still expected to be lower than the ceiling of two percent, although recent readings were slightly higher than expected, according to the Bank of Canada.
The bank expressed its concerns that exports continue to underperform and overall business investment has yet to pick up. Meanwhile, recent data supported the bank’s expectation of a soft landing in the housing market and stabilizing debt-to-income ratios for households.
With the GDP figure in the current quarter likely to be softer, the bank still expects a 2.5 per cent growth in 2014.
Peter Buchanan, a senior economist of Canadian Imperial Bank of Commerce, told Xinhua that the central bank tried very consciously to stay with the neutral stance, with the chance of rate hike and cut equally balanced.
Buchanan said that business investment and exports have shown enough momentum to offset an expected sluggish real estate market.
The timing and direction to change the rate policy will depend on how new information influences the balance of risks.
Buchanan predicted while inflation held firm modestly in January, the central bank still looks for the pace to remain well below its two per cent ceiling over 2014.
“It will be at least mid-2015 before the bank starts to raise the target for the overnight rate from the current one per cent,” Buchanan added.
