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Bank of Canada keeps rates on hold citing uncertainty

The Bank of Canada announced on December 7th, 2016 that it was keeping its trend-setting target overnight lending rate at 0.5 per cent.‎

The Bank is currently taking a wait-and-see approach amid heightened uncertainty on a number of fronts, including the actual policy outcomes of the U.S. election.

On balance, the Bank said there remains “a significant amount of economic slack” in Canada.

Indeed, underlying inflation pressures are actually lower than various Consumer Price Index measures might suggest due to past exchange rate depreciation. That said, this phenomenon is fading at this point.

The Bank said it remains concerned about consumer debt levels and the housing market, but expects recently announced policy changes to home financing to mitigate these risks over time.

All things considered, the Bank will likely keep interest rates on hold for at least another year and perhaps even into 2018.

As of December 7th, 2016, the advertised five-year lending rate stood at 4.64 per cent, unchanged from the previous Bank rate announcement on October 19th as well as from a year ago.‎

The next interest rate announcement will be on January 18th, 2017, with an accompanying update to the Monetary Policy Report at the same time.‎

(CREA 07/12/2016)

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