OTTAWA – The Bank of Canada is keeping its trendsetting interest rate unchanged at one per cent, where it has sat for three years and is likely to remain well into 2014.
Newly minted bank governor Stephen Poloz is showing no signs of breaking from the monetary policies of his predecessor, Mark Carney, who took up a new post this summer as head of the Bank of England.
In the explanatory note to Wednesday’s announcement, the Bank of Canada says it intends no changes as long as considerable slack remains in the economy, inflation remains muted and household finances continue to improve.
“Against this backdrop, the bank has decided to maintain the target for the overnight rate at one per cent,” it said.
The bank also noted that the global economy has less momentum than anticipated.
“In Europe, there are early signs of a recovery, and Japan’s situation remains promising,” it says.
“In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace.”
While commodity prices have been relatively stable, the bank says geopolitical tensions — which presumably include the bloody conflict in Syria and the continued unrest in Egypt — are raising the global price of oil.
It also says that uncertainty in the global economy has delayed “the anticipated rotation of demand in Canada towards exports and investment.”
The housing sector has been slightly stronger than anticipated, while household credit has continued to slow and mortgage interest rates are higher, the bank says, all of which point to “a continued constructive evolution of household imbalances.”
The bank’s next rate announcement is scheduled for Oct. 23.