The latest news from The Globe and Mail reports that, at this morning's monetary policy meeting, the central bank announced it would keep the overnight lending rate at its historical low of 0.25%, in line with industry expectations. It is understood that the central bank had previously guaranteed that low interest rates would be maintained at least until next summer. However, recently, Bank Governor Mark Carney has not been reiterating as frequently as before the bank's promise to adhere to this "commitment," sparking speculation within the industry that the central bank may put interest rate hikes on the agenda as early as next spring.
After the release of the interest rate decision, Governor Carney stated that both global and domestic financial conditions have significantly improved and exceeded expectations. However, he specifically mentioned that the appreciation of the Canadian dollar has already severely impacted the country's economic recovery, particularly the import and export sectors. He expressed that if the Canadian dollar could remain relatively low, the domestic economy would "recover more strongly." Due to the impact of currency fluctuations, the central bank has also revised downward its economic forecasts, keeping its GDP forecast for 2010 at 3%, but reducing the forecast for 2011 by 0.2% to 3.3%. Some in the industry pointed out that the central bank might intervene in the exchange rate of the Canadian dollar.
It was reported that yesterday, the Canadian dollar-to-US dollar exchange rate stood at 97.15 cents, up 0.83 cents from the previous trading day. Industry insiders indicated that next month, the Canadian dollar could reach parity with the US dollar.