Forexpros – The Bank of Canada left its benchmark interest rate unchanged for the tenth consecutive month in December, it announced on Tuesday.
In a statement, the central bank said it was leaving its overnight cash rate unchanged at 1.00%, in line with expectations.
According to the BoC, uncertainty around the global economic outlook has increased in the weeks since the Bank released its October Monetary Policy Report.
Conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened.
Recent economic data suggest that growth in the U.S. has been slightly more robust than anticipated. Nonetheless, household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weigh on U.S. growth.
The report added that recent economic indicators in Canada suggest that growth in the second half of this year is slightly stronger than the Bank projected in October.
Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels. The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar.
Although total CPI inflation has been slightly higher than projected, the Bank continues to expect the inflation rate to decline as a result of reduced pressures from food and energy prices and ongoing excess supply in the economy.
With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks.
Following the release of the data, the loonie pared losses against the U.S. dollar, with USD/CAD edging 0.1% higher to trade at 1.0174.
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