Investing.com - The Bank of Canada (BoC) kept its benchmark interest rate on hold in April and increased its growth forecast for the Canadian economy this year, it announced on Wednesday.
The BoC said it was leaving its overnight cash rate unchanged at 0.50%, in line with market expectations.
Furthermore, the Canadian monetary authority lifted its forecast for GDP growth in 2016 to 1.7%, compared to an earlier estimate of 1.4%.
However, it did cut its forecast for growth in 2017 to 2.3% compared to the previous estimation of 2.4%.
The BoC noted that the combined effect of global and domestic developments would normally have resulted in a downgrade to the outlook, but explained that the fiscal measures announced in the March Canadian budget will have a “notably positive impact on GDP”.
"Overall, the risks to the profile for inflation are roughly balanced. Meanwhile, financial vulnerabilities continue to edge higher, in part due to regional shifts in activity associated with the structural adjustment underway in Canada’s economy," the BoC said in the release.
"The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 0.5%," it concluded.
BoC Governor Stephen Poloz was to comment on the decision at a press conference later in the day.
Following the press release, the loonie strengthened reaching a 9-month high. USD/CAD was trading at 1.2753 from around 1.2800 ahead of the announcement, while EUR/CAD moved at 1.4384, compared to 1.4444 prior to the news.