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Economy recovering but rate held by BoC

by Jamie Henry | Mortgage Broker News | 03 Dec 2014

The Bank of Canada announced today it will hold its interest rate at one per cent, despite the economy showing signs of recovery.

“Canada's economy is showing signs of a broadening recovery. Stronger exports are beginning to be reflected in increased business investment and employment,” the Bank states in an official release. “This suggests that the hoped-for sequence of rebuilding that will lead to balanced and self-sustaining growth may finally have begun. However, the lower profile for oil and certain other commodity prices will weigh on the Canadian economy.”

The rate has been held at that mark since September 8, 2010.

Inflation has increased more than expected, yet it still remains below the bank’s target.

“The increase in inflation over the past year is largely due to the temporary effects of a lower Canadian dollar and some sector-specific factors, notably telecommunications and meat prices,” the release states. “Underlying inflation has edged up but remains below 2 per cent.”

Meanwhile, the U.S. recovery has had a positive effect on Canadian exports, providing another jolt to the Canadian economy.

“The U.S. economy has clearly strengthened, particularly business investment, which has benefitted Canada’s exports,” the release states. “Growth in the rest of the world, in contrast, continues to disappoint, leading authorities in some regions to deploy further policy stimulus. Oil prices have continued to fall, due to both supply and demand developments. In this context, global financial conditions have eased further.”