The Canadian dollar dropped sharply against its US counterpart today after the Bank of Canada left interest rates unchanged, signaling that the accommodative policy will persist for some time.
The BoC kept its key interest rate at 1 percent today. Bank’s Governor Mark Carney voiced belief that growth of the Canadian economy will accelerate this year. At the same time, he said that consumer inflation “has been somewhat more subdued than projected” and is “expected to remain low in the near term”.
With 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 policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target.
While an interest rate may still be possible, such comments suggest that it is not likely in the near future.
USD/CAD GMT jumped from 1.0265 to 1.0315 as of 19:03 GMT today. EUR/CAD was flat at 1.3397. CAD/JPY edged up from 90.82 to 91.01 following the drop to 90.48.
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