Bank of Canada Leaves Rates Alone

The BoC left rates unchanged today for the 2nd meeting in a row.

The Bank said, "Three major developments are affecting the Canadian economy: the protracted weakness in the U.S. economy; ongoing turbulence in global financial markets; and sharp increases in many commodity prices."

They said, "inflation is projected to rise temporarily above 4 per cent, peaking in the first quarter of 2009." 

In the U.S. inflation is already 4.2%.  That may not sound like a lot, but it is--especially when leveraged against a $14 trillion U.S./Canadian economy.  (U.S. inflation stats... / Canadian Inflation Stats...)

The BoC says, "inflation is then projected to converge to the core rate of inflation at the 2 per cent target in the second half of 2009."

5-year bond yields reacted to the news by falling to 3.30% this morning--their lowest level in over five weeks.  (That's naturally good for fixed mortgage rates--which hopefully might come down slightly if nothing changes in the near future.)

The next BoC interest rate meeting is September 3.