Canada: Bank of Canada maintains overnight rate target at 1.25%

The Bank of Canada has recently announced that it kept its target for the overnight rate steady at 1.25%, as expected, with the Bank Rate and the deposit rate remaining unchanged at 1.5% and  1% respectively.

Key takeaways from the official statement:

Global economic activity remains broadly on track with the Bank’s April Monetary Policy Report (MPR) forecast.

Ongoing uncertainty about trade policies is dampening global business investment and stresses are developing in some emerging market economies.

Global oil prices have been higher than assumed in April, in part reflecting geopolitical developments.

Inflation in Canada has been close to the 2 per cent target and will likely be a bit higher in the near term than forecast in April, largely because of recent increases in gasoline prices.

Economic data since the April MPR have, on balance, supported the Bank’s outlook for growth around 2 per cent in the first half of 2018.

Activity in the first quarter appears to have been a little stronger than projected.  

Solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.

Developments since April further reinforce Governing Council’s view that higher interest rates will be warranted to keep inflation near target.