The recent plunge in commodity prices and weak economies of Europe and China still give more arguments to Stephen Poloz, Governor of the Bank of Canada not to raise interest rates anytime soon.
The arrival of Mr. Poloz at the head of the central bank sixteen months ago coincided with the slide in the Canadian dollar rate to a low of five years against its American counterpart.
Mr. Poloz will keep the Bank of Canada policy interest rate at 1% for a 32nd consecutive time, rendering his decision at 10am this morning, provide 24 economists monitored by Bloomberg.
The recent drop in energy prices, including gasoline, will help to contain inflation in the country during the coming months. The continuing weakness of the labor market is also one of the factors that explain that there is still overcapacity in the economy.
Furthermore, the slowdown of the Chinese economy and the European economy provides an additional reason for the Bank of Canada to keep its key rate at 1% for a long time.
A large majority of economists predicted until recently the Bank of Canada to raise its key rate by mid-2015.
However, given the fall in the rate of Canadian two-year bonds occurred last week, negotiators rather expect that the authorities of the country’s monetary policy will tighten credit conditions in 2016.
The Bank of Canada will surely indicate in its statement that it continues to monitor closely the situation of imbalances in Canadian households. Low interest rates continue to fuel indeed strong demand in certain real estate markets in the country and lead many households to take on debt beyond their capacity.