Investing.com - The Bank of Canada kept its benchmark interest rate on hold in March, saying that risks to the inflation profile remained roughly balanced, it announced on Wednesday.
The BoC said it was leaving its overnight cash rate unchanged at 0.50%, in line with market expectations. All 25 analysts in a recent Bloomberg survey had forecast that the Canadian central bank would stand pat.
Furthermore, experts explained that the BoC was unlikely to make a move pending the publication of the government budget which will be released on March 22.
In the statement, the BoC noted that the global economy is progressing as it had anticipated in it's January report.
Financial market volatility, reflecting heightened concerns about economic momentum, appears to be abating. Although downside risks remain, the Bank still expects global growth to strengthen this year and next.
At the same time, the low level of oil prices will continue to dampen growth in Canada and other energy-producing countries.
Prices of oil and other commodities have rebounded in recent weeks. In this context, and in light of shifting expectations for monetary policy in Canada and the United States, the Canadian dollar has appreciated from its recent lows. With these movements, both the price of oil and the exchange rate have averaged close to levels assumed in the Bank's January report.
Additionally, GDP growth in the Canadian economy the fourth quarter was not as weak as tthe BoC had expected, although it admitted that the the near-term outlook for the economy remains broadly the same as in January.
National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are sensitive to exchange rate movements.
The BoC further recognized that inflation was evolving as expected. "The factors that pushed total CPI inflation up to 2 per cent will likely unwind in the months ahead," the bank explained.
Taking all of these developments into consideration, the Bank judges that the current stance of monetary policy remains appropriate.
Immediately following the press release, USD/CAD was trading at 1.3367 from around 1.3420 ahead of the announcement, while EUR/CAD moved at 1.4656, compared to 1.4696 prior to the news.