Bank Of Canada Maintains Interest Rate, Expects No Changes Until Q2 2010

(RTTNews) - The Bank of Canada on Tuesday announced that it is maintaining its key interest rate at 0.25 percent, as expected.

Policy makers said the overnight target rate can be expected to remain at its current level until the end of the second quarter of 2010, given the overall risks to inflation are tilted slightly to the downside.

The central bank noted that recent indicators point to the start of a global recovery from a deep, synchronous recession, but insisted “significant fragilities remain” following the worst economic downturn in decades.

“A recovery in economic activity is also under way in Canada,” said the BoC in a statement accompanying the rate decision. “This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence.”

However, the central bank noted that persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures.

“The current strength in the dollar is expected, over time, to more than fully offset the favorable developments since July,” the BoC cautioned.

Canada’s loonie has been charging toward parity with its US counterpart, hitting a yearly high near C$1.02 last week.

With aggregate demand shifting further toward domestic demand and away from net exports, growth is expected to be slightly higher in the second half of this year than previously projected but to average slightly lower over the balance of the projection period.

The central bank projects the Canadian economy to grow by 3.0 percent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 percent this year.

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