In a recent statement issued by The Bank of Canada, it admitted that the Ukrainian crisis has played the role of adding fuel to fire and resulted in “geopolitical uncertainty” that evidently affects its economic outlook and roiled financial markets. However, it assured that the central bank’s key overnight interest rate will still be kept unchanged at 1 per cent, which is where it’s been since September 2010.
Furthermore, it was added that the bank will tone down its recent anxiety about disinflation on the home front, cautioning that “downside risks to inflation remain important.” During the announcement of its second rate in 2014, the bank stated that the “excess supply in the economy and competition in the retail sector will keep inflation well below the two per cent target this year.” Previously, Bank of Canada Governor, Stephen Poloz, warned about worsening disinflation risks, sparking a debate about a possible rate cut to boost the economy.
Majority economists have predicted that a rate cut is less likely in near future, in fact it is highly anticipated that the bank’s next move will be rate hike, sometime next year. Assistant Chief Economist at Royal Bank of Canada, Dawn Desjardins, stated that “this is likely to keep the bank sidelined until there is clear evidence that both the economy and inflation are accelerating said.” Meanwhile, Bank of Montreal chief economist, Douglas Porter, mentioned in a research note that “the bank maintains a relatively upbeat view on the global and Canadian economy, but they continue to frame that view in extremely cautious language, driving home the point that they are not inclined to do anything with rates for quite some time.”
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