The Bank of Canada left its benchmark rate on overnight loans between commercial banks stagnant at 1% for the 22 consecutive meeting, which is the final announcement by the Bank’s Governor Mark Carney, which added that a tighter monetary policy may be required for a “period of time” as the economic expansion moves on. The decision was not a surprise to markets and analysts. Policy makers said inflation has been slower than expected since the last decision and economic growth has been better. “The considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required, consistent with achieving the 2 per cent inflation target,” policy makers led by Carney, 48, said in a statement today. This is the last rate announcement for Bank Governor Mark Carney before he leaves for the top job at the Bank of England on July 1. The successor, Governor Stephen Poloz will take responsibility for a Canadian economy increasingly reliant on exports and investment as indebted consumers and governments curb spending. The central bank said annualized first-quarter economic growth probably exceeded its April forecast of 1.5%. Economists expect the May 31 report from Statistics Canada to show a 2.3% expansion. The Bank also asserted the Canadian economy will not reach its “full capacity” until mid-2015, with inflation under the 2% target until then. Analysts expect the bank’s policy rate to remain at 1% until the end of next year. Canada’s inflation rate last month was the weakest since three years ago since the end of the last recession at 0.4%. Today’s statement also repeated that consumer debt burdens will stabilize around the current record 165% of disposable income, after being elevated in part by a rise in housing investment.
