Central bank holds line on key interest rate/STEVE RENNIE THE CANADIAN PRESS O T TAWA — The cost of lines of credit and variable-rate mortgages are not expected to change any time soon as the Bank of Canada held its key interest rate steady at one per cent on Wednesday. In a largely status-quo statement, the central bank indicated it does not foresee enough of a change in Canada’s economic fortunes to adjust the rate from the same level it has held for the last four years. “Overall, the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished, the bank said. Economists, who had widely expected no change to the overnight rate, found Wednesday’s statement to be less gloomy — although not necessarily more optimistic — than the bank’s last release in July. “We just think the message was a little less downbeat than in the summer, said Doug Porter, chief economist with BMO Capital Markets. “I would characterize it as moving close to neutral. I mean, they’ve always said they were in neutral . . . but you often had the impression that it was neutral with a big ‘but’ — but we’re worried about the downside. Gone in this statement are past references to “serial disappointment with the economy’s performance, a “soft landing for housing and that closing the output gap “hinges critically on stronger exports and business investment. Those omissions could be read as the central bank striking a slightly more upbeat tone this time around. “It was almost more what they didn’t say rather than what they did say, Porter said. Both at home and abroad, the bank says the economy is performing largely as expected. In Canada, inflation continues to hover around two per cent, which the central bank said is just as it expected back in July when it released its last monetary policy report. “Recent data reinforce the bank’s view that the earlier pickup in inflation was attributable to the temporary effects of higher energy prices, exchange rate passthrough, and other sector-specific factors rather than to any change in domestic economic fundamentals, it said. But while the risks for inflation remain, in its words, “balanced, the central bank said the risks associated with household debt have not gone away.
Posted on: Thu, 04 Sep 2014 18:44:46 +0000
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