In its regularly scheduled January 18th announcement, the Bank of Canada chose to leave the current bank rate of 1.25% unchanged. The Bank indicated in a press release, which is available on its Web site at
http://www.bankofcanada.ca/en/fixed-dates/2011/rate_180111.html, that while the economic recovery in Canada is proceeding broadly as expected, the pace of both consumption growth and residential investment are expected to be constrained by what the Bank termed “stretched household balance sheets”. However, the Bank expects business investment to continue to rebound “strongly”.
Notwithstanding the expected growth in business investment, the Bank noted that the cumulative effect of a strong Canadian dollar and Canada’s poor relative productivity performance will act to restrain export growth and add to Canada’s current account deficit.
Overall, the Bank concluded that maintaining the bank rate at its current level was the appropriate course of action.