Bank of Canada Hold Rates at 0.50% Will Await Impact of Federal Budget

The Bank of Canada kept its benchmark interest rate unchanged as expected today, as the central bank will wait and see what Ottawa plans to spend on stimulating the economy in its forthcoming federal budget before taking any further action..

The central bank kept its benchmark target for the overnight rate steady at 0.5 per cent, saying in a statement “the near-term outlook for the economy remains broadly the same as in January.”

The bank cut its benchmark rate twice last year in an attempt to stimulate a Canadian economy that had been waylaid by tanking oil prices. When the bank revealed its quarterly monetary policy report in January, the central bank lowered its economic growth projection for this year to 1.4 per cent from two per cent.

Bank of Canada governor Stephen Poloz said at the time that any fiscal measures contained in the federal budget — which is set to be unveiled at the end of the month — could bump that forecast.

Based on its statement Wednesday, it’s clear the bank is OK to wait on the sidelines to see what the government has up its sleeve before choosing to tinker with lending rates again.

Its statement Wednesday said as much: “An assessment of the impact of the upcoming federal budget’s fiscal measures will be incorporated into the Bank’s April projection.”

via CBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza