Rates Unchanged

There was no change to rates at today’s Bank of Canada meeting.

Pretty much every economist in Canada expected them to leave the benchmark interest rate at 0.25%, and they did.

In its statement today, the BoC said:

• “Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010.”  (That suggests at least 11 more months of prime rate at 2.25%.)
• “Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth.”
• “However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth.” (CDN$ chart)
• “The Bank projects that the economy will contract by 2.3% in 2009 and then grow by 3.0% in 2010 and 3.5% in 2011.”  (These 2009 and 2010 projections are notably better than the 3.0% 2009 decline and 2.5% 2010 growth the BoC projected in April.)
• “The Bank still expects core inflation to diminish in the second half of this year before gradually returning to 2 per cent in the second quarter of 2011.”

The BoC issues its Monetary Policy Report on Thursday, which will contain more detailed information on Canada’s economic health.

The Bank’s next interest rate announcement is September 10.