2014-35 Bank of Canada did not change the interest rate

Today the Bank of Canada issued its  Monetary Policy Report (go here and click on the summary) and made the interest rate decision. The decision: keep interest rates unchanged. They have not been changed for 4 years - the longest since 1950s.

The Bank would raise interest rates if it expects inflation to increase, and lower them if it expects inflation to decrease, in the next year or so. Factors that lead to an increase of inflation are
- economy operating beyond potential
- booming exports
- raising raw material or food prices, in particular a raising price of oil.

The current situation is mixed:
- economy is considered to operate below potential
- US economy is growing fast, which points to raising exports to the US. Other economies are weak, but 3/4 of our exports go to the US
- oil prices have been falling, leading to lower inflation.

So - a mixed bag.

Here are the monetary policy report highlights:

Highlights
 Inflation in Canada is close to the 2 per cent target. Underlying inflationary
pressures are muted, given the persistent slack in the economy and the
continued effects of competition in the retail sector.
 The outlook is for stronger momentum in the global economy. However, the
profile is weaker than in July and is diverging across regions. Growth remains
reliant on exceptional monetary policy stimulus.
 Canada’s real GDP growth is projected to average close to 2 1/2 per cent over the
next year before slowing gradually to 2 per cent by the end of 2016.
 As the economy reaches full capacity in the second half of 2016, inflation is
projected to be about 2 per cent on a sustained basis.