Canada’s central bank kept its benchmark target for the overnight rate steady at 1.75 percent and while it expects to raise the rate further it said inflation would be lower than forecast in coming months and there appears to be additional room for the economy to expand without higher inflation.
The Bank of Canada (BOC), which in October raised its rate for the fifth time since beginning a tightening cycle in July 2017, also said there were signs of less economic momentum in the current quarter as activity in the country’s energy sector “will likely be materially weaker than expected.”
“Weighing all of these developments, Governing Council continues to judge that the policy interest rate will need to rise into a neutral range to achieve the inflation target,” BOC said, adding the appropriate pace of rate hikes will depend on numerous factors, such as the impact of higher rates on consumption and housing, global trade policy, oil prices, business investment and the assessment of the country’s economic capacity.
Canada’s inflation rate rose to 2.4 percent in October from 2.2 percent in the previous month – above the BOC’s 2.0 percent target – while annual economic growth slowed to 1.9 percent in the second quarter from 2.3 percent in the third quarter.
Canada’s dollar, which has depreciated steadily this year, fell 0.6 percent in response to the BOC’s statement to trade around 1.337 to the U.S. dollar, down 5.8 percent this year.
The Bank of Canada released the following statement:
Canada holds rate, sees lower than expected inflation