Bank of Canada: interest rate to stay at one per cent for ‘period of time’

The Bank of Canada kept the key policy rate steady at one per cent today, but pushed the prospect of rising borrowing costs further into the future.

Though the decision to leave the current rate untouched was widely expected, economists had been debating whether the bank would drop its stance that the next rate move would be a hike in light of weak economic growth in the last six months of 2012.

The bank continued to hint a future raise, something it has been signaling since April 2012, but further softened the wording of its warning. ”The considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required,” the BoC said in its policy announcement. In January, the bank had said a hike would be “less imminent,” than earlier anticipated.

The bank said it expects Canadian economic growth to pick up from current depressed levels through 2013, aided by moderate growth in household spending and rising business investment and exports — although the latter are nonetheless expected to remain below pre-recession levels until late 2014. Canadians’ debt-to-income ratio should stabilize around current levels, the bank added.

Looking at conditions abroad, the BoC said it expects growth in the U.S. to be slower than forecast in the near term due to the impact of sweeping spending cuts known as the sequester. Over the next couple of years, though, the pace of economic expansion south of the border remains consistent with previous forecasts, the bank said.

Accelerating growth in China and an expected pick-up in other emerging economies bodes well for global growth, despite the continuing recession in Europe, the bank said.




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