Investing.com - The Bank of Canada kept its benchmark interest rate on hold in December, saying that growth dynamics remain broadly in line with expectations, it announced on Wednesday.
The BoC said it was leaving its overnight cash rate unchanged at 0.50%, in line with expectations.
Global economic growth is evolving essentially as the Bank had anticipated in its October Monetary Policy Report.
In Canada, the dynamics of growth have been broadly in line with the Bank’s MPR outlook. The economy continues to undergo a complex and lengthy adjustment to the decline in Canada’s terms of trade.
The resource sector is still contending with lower prices for commodities. In non-resource sectors, exports are picking up, particularly in exchange rate-sensitive categories. However, business investment continues to be weighed down by cuts in resource-sector spending.
The Bank expects GDP growth to moderate in the fourth quarter of 2015 before moving to a rate above potential in 2016.
In the midst of all of these adjustments, inflation is in line with the Bank’s October outlook. Total CPI inflation remains near the bottom of the Bank’s target range, owing to declines in consumer energy prices. Core inflation is close to 2% as the effects of the lower dollar and the output gap continue to offset each other.
The Bank judges that the risks around the inflation profile remain roughly balanced over the projection horizon. Vulnerabilities in the household sector continue to edge higher while overall risks to financial stability are evolving as expected.
Taking all of these developments into consideration, the Bank judges that the risks to the outlook for inflation remain within the zone for which the current stance of monetary policy is appropriate.
USD/CAD was trading at 1.3388 from around 1.3401 ahead of the announcement.