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Loonie rises as national bank holds the line on interest rates

May 31st, 2011

The Bank of Canada has held its interest rate at one per cent — impacting rates banks offer to businesses and consumers for borrowing and saving.

“The global economic recovery is proceeding broadly as expected,” the bank said in a statement posted on its website Tuesday.

Statistics Canada said there was a 3.9 per cent expansion in the Canadian economy in the first quarter, less than what the central bank was expecting.

As a result, policymakers at the bank elected to balance keeping rates low to support a queasy economy, with the inflation that easily accessible money brings.

But on that note, inflation has increased only a slight amount, with rising gas prices and tax changes aiding and abetting that.

After keeping the rate at 0.25 per cent for two years, the bank hiked the rate by a quarter of a percentage point at three straight policy meetings in mid 2010 before leveling off this year.

The bank’s statement affected the loonie, with the Canadian dollar trading at 103.26 cents US on Tuesday, up 0.93 of a cent since the bank’s announcement.

The bank’s next decision on interest rates is July 19.

 

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