Tuesday, July 11, 2006

BoC holds rate steady

The Bank of Canada (BoC) is holding steady at 4.25%. Most analysts foresaw today's announcement, accepting Dodge's credibility after he forewarned markets that another hike was unlikely. Still, it's a surprising move when inflation is rising. A major clincher in the bank's decision was likely last month's announcement by Statistics Canada of the country's net job loss of 4,600.
The Bank's press release says:

The global economic expansion remains robust. Growth in Canada in the first half of 2006 appears to have been a little stronger and the Canadian dollar has traded in a somewhat higher range than was envisaged in the April MPR. As well, there was a further shift in the composition of demand towards consumption and away from exports. Total CPI inflation has remained above the 2 per cent target, mainly because of increases in consumer energy prices, while core inflation moved up to 2 per cent slightly sooner than expected. All factors considered, the Canadian economy is currently judged to be operating just above its production capacity.

More than a few folks will be curious to see the BoC's next inflation forecast (to be released July 13).

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