By TraderVox.com
Tradervox (Dublin) – The Bank of Canada decided to keep prolong it monetary stimulus and indicated that the risks are edging closer to quicker inflation reducing the risk of another global recession. The BOC joined its peers in euro area and UK as they too have kept their stimulus package. Officials at the bank of Canada have left the main interest rate at one percent making this the longest pause since the 1950s. Further, officials have indicated that there is less slack in the economy due to the easing global tension and faster domestic spending, which may list prices.
The Canadian dollar increased after this announcement that came the same day as the ECB President Mario Draghi said that the inflation will break the ECB’s two percent limit this year. Such sentiments were also evident in UK, when two Bank of England policy makers indicated that the inflation may be firmer than expected.
According to Dawn Desjardins, an Assistant Chief Economist at Royal bank of Canada in Toronto, the Bank of Canada is trying to shed some light on the broader range of risks for the financial market, businesses and households to react hence kept the interest rates low.
Indicating the same sentiments as in the UK, the Bank of Canada kept its interest rates low and said that inflation might be greater that it had forecasted in January due to reduced economic slack and the higher oil prices. The officials also indicated that the economic growth might be faster than projected due to factors that were not specified. The bank of Canada policy makers led by the governor Mark Carney indicated in a statement released today that the development that has been experienced recently is marginal and the economy still required monetary stimulus.
The loonie increased by 0.7 percent against the dollar to sell at 99.02 cents per US dollar yesterday, a day before the decision by the COB officials. The USDCAD pair will also be affected by the labor market report expected later today.
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