Bank of Canada holds the interest rate steady at 1%
Back in July, the Bank of Canada raised their benchmark interest rate for the first time in seven years, bringing it to 0.75%, up 0.25% from the previous 0.5%. The bank then raised the interest rate by another 0.25% in September, bringing the number up to an even 1%.
The interest rate that the Bank of Canada puts in place sets a precedent for all other banks across the country. So, all eyes were on the Bank of Canada to see whether another change in interest rates was in the cards. The decision however, was to keep the interest rate holding steady at 1%.
"The current stance of monetary policy is appropriate," the bank said in announcing its decision. "While less monetary policy stimulus will likely be required over time, [the bank] will be cautious in making future adjustments to the policy rate."
While many economists were unsurprised by the banks decision, currency traders seemed a little caught off guard. After the banks announcement was made, the Canadian dollar slipped a full percent trading off at 78.15 cents US.
"The Bank of Canada shifted to a significantly more cautious tone on interest rates Wednesday, prompting a sharp descent by the Canadian dollar," said Cambridge Global Payments strategist Don Curren, "and perhaps presaging more weakness in the currency as expectations about … monetary policy evolve."
According to the latest Monetary Policy Report, the bank expects the Canadian economy to grow by 3.1% in 2017, 2.1% in 2018 and 1.5% in 2019. Next year’s number is slightly better than the bank forecasted three months ago, but the opposite can be said about the new 2019 numbers.