Bank of Canada Holds Rate Steady
The Bank of Canada released it’s quarterly Monetary Report today, and held rates firm at 3/4 per cent.
The Bank cut growth expectations for 2015, but expects Canada’sÂ GDPÂ to rebound in 2016. Much of this rebound will depend on a growing U.S. and global economy, and on the ability of Canadian exporters to capture a bigger share because of ourÂ lower dollar.
The Bank’s estimates for growth also depend on maintaining strong consumer demand, which may be difficult to maintain given high levels of household debt and lingering labour market weakness.
The underlying thinking behind the Bank’s optimism is that the negative consequences of falling oil prices hit quickly, and any benefits from the lower dollar will take longer to appear. So it looks bad now – growth stalled in 2015 Q1, but we’ll rebound eventually.
It’s also worth noting that government will only contribute 0.2% to GDP growth in 2015, pretty measly given the opportunities for public infrastructure investment. Take a look at the FCM pre-budget call for investments inÂ clean water & public transit.