The Bank of Canada has held its key interest rate steady today. The Bank of Canada however hinted that rate increases could come sooner than analysts have predicted.
The Bank of Canada has kept its overnight rate at one percent, saying core inflation will reach its 2 percent target earlier than it had anticipated and that it sees economic growth speeding up in the second half of 2011 after a second-quarter slump.
The overnight target rate has remained steady at one per cent since it was last raised in September 2010.
Canada’s central bank became the first in the Group of Seven advanced economies to tighten monetary policy following the global financial crisis, hiking its rate three times from June to September last year.
It has been on pause since then, but with an eye on threats abroad such as the weakening U.S. economy and the European sovereign debt crisis that threaten to derail growth at home.
The bank’s comments pushed the Canadian dollar to a two-month high against the U.S. dollar.
The central bank believes that the economy is on track to return to full capacity in 2012, with the expectation that growth will accelerate in the second half of this year.
The Bank of Canada did state several caveats to hiking rates and advised that its projections assume that European leaders will be able to contain their debt crisis.
The bank’s next rate announcement is scheduled for September 7, 2011