The Bank of Canada’s economic outlook and key policy rate stayed unvaried when it said on May 29th2013 it was keeping its trend-setting overnite lending rate One per cent.
In its April announcement, the Bank recognised the persistent business weakness and cut its forecast for Canadian economic expansion to 1.5 per cent in 2013.
Likewise, total CPI inflation was barely less tough than projected in the Bank’s April MPR, but the Bank still expects inflation to reach its Two % target in mid-2015. Although recent economic news implies that expansion in the first quarter came in stronger than anticipated, the Bank nevertheless expects annual economic expansion this year to stay in accordance with its outlook.
“The Bank recognizes that growth in household debt is moderating,” said Gregory Klump, CREA’s Chief Economist. “It’s a helpful development and yet one more reason for the Bank of Canada to keep IRs on hold.”
“The net position is that inflation remains moribund and the Canadian economy is still in low gear, so there is not any reason for the Bank to start raising interest rates any time soon,” claimed Klump. “Additionally, the Bank of Canada knows that a unexpected change in direction for rate policy would spook finance markets and gives the Bank another reason to keep rates on hold once inward bound Bank of Canada Governor Stephen Poloz takes the helm.”
As of May 29th, 2013, the advertised five-year lending rate stood at 5.14 per cent, unvaried from the previous Bank rate statement on April 17th.