The markets predicted it right, the Bank of Canada maintained its overnight rate at 0.5%. Correspondingly, the bank rate stayed at 0.75% and the deposit rate at 0.25%. According to the BoC’ full statement the global economy strengthened, while a number of prices commodities rose such as oil.
In contrast to the US economy, Canada still operates with material excess capacity. Despite employment growth remained strong, indicators point to a slack in the labor market. Also, the negative income and wealth effects will prolong. Even though, the resource sector’s change to past commodity price declines appear to be almost complete. The full statement of the bank explains further:
“The Canadian dollar has strengthened along with the US dollar against other currencies, exacerbating ongoing competitiveness challenges and muting the outlook for exports. Consumption is expected to remain solid, while residential investment will be tempered by previously announced changes to housing finance rules and by mortgage rates that have risen in response to higher bond yields. Federal and provincial fiscal measures are still expected to support growth in 2017.”