Canada locks its benchmark rate at 1 percent

Ottawa, May 30 (IANS) The Bank of Canada held its benchmark interest rate at 1 percent Wednesday in the last policy meeting before governor Mark Carney leaves for England to take his new post.

This is the 22nd consecutive time that the central bank kept the rate steady when it was cut to 1 percent in September 2010, reported Xinhua.

The bank said in a statement that Canada’s economy performed better in the first quarter than its prediction, and the whole year’s growth is expected to remain broadly in line with its April ‘s forecast of 1.5 percent.

“Consumer spending is expected to grow at a moderate pace, business investment to grow solidly, and residential investment to decline further from historically high levels,” the bank said.

It also expected the inflation to remain weak in coming quarters “before gradually rising to 2 percent by mid-2015 as the economy returns to full capacity and inflation expectations remain well-anchored”.

The bank decided to leave the rate unchanged, “with continued slack in the Canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector”.

But it still insisted to raise the rate someday when the economy steps out of sluggish and the inflation needs to be restrained.

“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 percent inflation target,” the bank concluded.

Carney will start to serve as the governor of Bank of England July 1.

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