Bank of Canada 1Bank of Canada softens stance, but rate hike still on horizon Gordon Isfeld | Financial Post 13/03/06



OTTAWA — After months of staring down increasingly threatening economic data here and abroad, the Bank of Canada appears to have blinked — ever so slightly.


The central bank on Wednesday did what it has done for two-and-a-half-years, leaving its near-rock-bottom interest rate unturned. But the wording behind the decision — keeping its trendsetting lending level at 1% — has been softened somewhat. The bank, which has left its key rate at the same level since September 2010, also highlighted concerns over continued slack in the economy and pointed to a longer extension of that holding pattern.


“I don’t think anybody is going to be taken by surprise by what they are saying. I think most believe that the bank is going nowhere for a long period of time,” said Douglas Porter, chief economist at BMO Capital Market (and my childhood buddy!)

“But to have the bank actually spell it out so explicitly was a little bit of a surprise,” he said. “They’ve been a little bit stronger in their language than most had expected. But it’s hardly a shock.”

In their statement, policymakers said that given the “continued slack in the Canadian economy, the muted outlook for inflation, and the more constructive evolution of imbalances in the household sector, the considerable monetary stimulus currently place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.”


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