Bank of Canada holds interest rates steady

The Bank of Canada announced on March 5th, 2014 that it was keeping its trend-setting overnight lending rate at 1 per cent, where it has been parked since September 2010. Canadian private sector forecasters currently expect the overnight lending rate to remain on hold until well into 2015.

 

In its assessment of the overall economy, the Bank recognized that recent economic growth was slightly stronger than it expected and inflation was a bit higher than it anticipated. On their own, these two factors are likely to result in increased financial market speculation about interest rates rising sooner than previously expected.

 

However, the Bank also cautioned that it continues to expect that inflation will stay well below the midpoint of its target range for inflation of between one and three per cent over the rest of 2014. This means it remains in no rush to increase interest rates.

 

The Bank said it is still worried about Canadians’ high levels of household indebtedness but took comfort from recent Canadian housing market trends that point to a soft landing for the Canadian housing market.

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