Central bank keeps key interest rate at 1 per cent
By: CTV.ca News Staff
Date: Tuesday Mar. 1, 2011 8:08 AM PT
Canada's central bank will keep its short-term interest rates at historically low levels for the early spring, as domestic inflation remains under control but uncertainties persist about the global economy.
The Bank of Canada announced Tuesday that it would keep its overnight lending rate at 1 per cent, keeping it at the same level where it has been for the past six months.
While acknowledging that Canada's economy is seeing a slightly faster-than-expected recovery, the central bank also said it harbours concerns about the global economy, as well as a persistently strong dollar that poses challenges for Canadian exports.
But the bank said business investment is on the rise in Canada and a greater global demand for commodities is driving up exports, despite the high dollar. American demand for Canadian exports is also increasing.
The bank also reports that consumption growth "remains strong" and household spending is growing in line with household incomes.
Outside of Canada, the central bank sees the stimulus-dependent American economy and the ongoing debt problems in Europe as "significant" sources of uncertainty in the global economy.
Ian Lee, an assistant professor at Carleton University's Sprott School of Business, said the Canadian economy is in a position of relative strength because it has not had to pay for foreign bailouts, like Germany did for countries in southern Europe. And Ottawa does not have to deal with indebted internal governments, such as Illinois or California in the United States.
"We are the strongest economy in the Western world, in my judgment, bar none," Lee told CTV News Channel during an interview from Ottawa on Tuesday morning.
The central bank also said rising inflation is becoming an issue around the globe, though not so much in Canada where "underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy."
The central bank is scheduled to announce its next update on interest rates on April 13.
The Schacter Team - Langley Real Estate