Instant view: Bank of Canada gives no hint of next rate hike

Tue Mar 1, 2011 9:28am EST
 
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TORONTO (Reuters) - The Bank of Canada kept its main interest rate unchanged at 1 percent on Tuesday and gave no signal it plans to push it up soon, saying underlying inflationary pressures remain subdued.

COMMENTARY:

PETER BUCHANAN, SENIOR ECONOMIST OF CIBC WORLD MARKETS

"Not really a great surprise at all. As far as the global economy, growth is proceeding in line with earlier projections. What they have done though is added a reference to geopolitical risk. So that obviously refers to the risk that oil prices will remain high as a result of unsettled conditions in the Middle East. Domestic recovery is proceeding slightly faster than they had expected ... They reiterated some earlier concerns, namely the high C$, Canada's poor productivity performance, risks they pose for future strength in exports. On the policy side, what's significant is they've noted that any further reduction in monetary policy will have to be carefully considered. That's not different from what they said before, but it does suggest that they are going to proceed fairly cautiously. So a rate hike in April is not a 100 percent foregone conclusion. If anything, they will probably wait until the May meeting before they move off the fence and tighten policy further."

"If oil prices remain high, that's not necessarily such a bad thing for Canada's economy, but certainly it's not helpful to some of our key export markets like the U.S., so obviously they are concerned about that."

PAUL FERLEY, ASSISTANT CHIEF ECONOMIST, ROYAL BANK OF

CANADA

"They slightly upgraded their outlook for the Canadian economy, acknowledging that the recovery has been proceeding slightly faster than expected."

"However they still expressed concerns about challenges presented by persistent strength in Canadian dollar and Canada's poor productivity performance."   Continued...