Bank of Canada Holds Line on Interest Rates

The cost of borrowing money will remain at record low levels until at least the middle of this year as the Bank of Canada kept its benchmark lending rate at a record low 0.25 per cent Tuesday.

“Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010,” said Bank of Canada Governor Mark Carney. The bank rate remains unchanged at 1/2 percent, and the deposit rate is 1/4 percent.

Economic growth in Canada resumed in the third quarter of 2009 and is expected to have picked up further in Q4.  Growth has been driven by domestic demand supported by “exceptional monetary and fiscal stimulus, as well as extraordinary measures taken to support financial systems.” However, that growth has been tempered by the persistent strength of the Canadian dollar. Carney noted the strong Loonie's effect on exporters, which combined with “the low absolute level of US demand” continue to act as “significant drags on economic activity in Canada.”