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The Bank of Canada (BOC)  announced that it is maintaining its target for the overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.BOC projects that Canada's real GDP will grow by 2.1 per cent in both 2017 and 2018. This implies a return to full capacity around mid-2018, in line with October's projection.Inflation in Canada has been lower than anticipated since October, mainly because of declines in food prices. Measures of core inflation are below 2 per cent, reflecting material excess capacity in the economy.

Bank of Canada governor Stephen S. Poloz says a rate cut remains on the table if downside risks materialize. He highlighted unknowns around U.S. President-elect Donald Trump’s policies in a rate decision and indicated he’s prepared to cut interest rates if new protectionist measures derail the nation’s economy. The central bank kept its key interest rate unchanged at 0.5 percent and said “significant uncertainties” from the U.S. are weighing on the economic outlook. In contrast to the United States, Canada’s economy continues to operate with material excess capacity. While employment growth has remained firm, indicators still point to significant slack in the labour market. The resource sector’s adjustment to past commodity price declines appears to be largely complete, but negative wealth and income effects will persist. 

January 18CAD page 001

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