Investing.com – The Bank of Canada left its benchmark interest rate unchanged in May, it announced on Tuesday.
In a statement, the bank said it was leaving its overnight cash rate unchanged at 1.00%, broadly in line with expectations.
According to the BoC, the global economic recovery is proceeding broadly as expected in the bank’s April Monetary Policy Report.
While underlying inflation is relatively subdued, the BoC expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3% in the short term.
The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation.
On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.
The accompanying rate statement released after the announcement said, “To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2% inflation target.
The statement added that, “Such reduction would need to be carefully considered.”
Following the release of the data, the loonie was up against the U.S. dollar, with USD/CAD shedding 0.95% to hit 0.9675.
In a statement, the bank said it was leaving its overnight cash rate unchanged at 1.00%, broadly in line with expectations.
According to the BoC, the global economic recovery is proceeding broadly as expected in the bank’s April Monetary Policy Report.
While underlying inflation is relatively subdued, the BoC expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3% in the short term.
The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation.
On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.
The accompanying rate statement released after the announcement said, “To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be eventually withdrawn, consistent with achieving the 2% inflation target.
The statement added that, “Such reduction would need to be carefully considered.”
Following the release of the data, the loonie was up against the U.S. dollar, with USD/CAD shedding 0.95% to hit 0.9675.