The Bank of Canada renewed without surprise its target rate of overnight loans, set at 0.75% since January.
In the brief statement expressing its decision, the Bank states that “the underlying trend of inflation is between 1.6% and 1.8%, consistent with the persistent margin of spare capacity within the economy. ”
It was only towards the end of next year as this excess capacity should have all been called into activity.
By then, the overall inflation measured by the consumer price index oscillates near the lower limit of the target range of 1% to 3% due to “transitory effects of the sharp drop in the price of energy. ”
As for core inflation, which excludes from the CPI’s most volatile components such as gasoline, fruits and vegetables, it remains above 2% because of “the past depreciation of the Canadian dollar” and “industry factors”.
The Bank expects a rebound in growth after a poor first quarter in both Canada and the United States.
Finally, the monetary authorities take note of the recent appreciation of the Canadian dollar, driven both by higher oil and a weaker US dollar. “If this situation continues, the net effect should be evaluated as new data become available in the coming months.”
The next policy rate di fixing date is 15 July. The Bank will issue the same time the day of its economic scenario in the last Monetary Policy Report.