Release: BoC leaves overnight rate at 1.00% and preserves cautious tone

As expected, the Bank of Canada (BoC) left its target for the overnight interest rate unchanged at 1.00% for a fourth consecutive meeting since September 2010. In light of today’s BoC statement, we still identify 19 July 2011 as the likeliest date at which it will next raise its policy rate. Those looking for a change to a more hawkish tone, particularly in the forward-looking guidance part of the statement were disappointed.

In the wake of today’s statement, markets will pare back bets that a rate hike is in the pipeline in April or May, thereby modestly selling off the short end of the yield curve and leading the CAD down a bit after it sat above USD 1.03 prior to the decision. All said, with the added consideration that the U.S. Federal Reserve is expected to bring QE2 to term by June, a bit longer pause for the BoC until a next hike in July still appears the fairest bet.

This release from the Bank of Canada tells us that prime rate that we see and deal with at the bank level will remain in effect at 3% until April/May and potentially until July.
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Thanks
Kevin Harris