Key interest rate kept low to stabilize dollar
Though the economy is showing signs of recovery, market volatility and the robustness of the Canadian dollar are slowing economic growth, bank officials said.
"The current strength in the dollar is expected, over time, to more than fully offset the favourable developments," according to a Bank of Canada press release.
By keeping key interest rates low, officials hope to circumvent the problems associated with excessively strong currency. The key interest rate is the amount banks charge one another when they borrow among themselves. Altering it has broad-reaching effects on consumer loan and mortgage rates, and the exchange rate.
The bank's decision is likely related to its trade relationship with the United States. About 80 per cent of Canada's exports are purchased by the United States, according to the Associated Press. If the cost of purchasing such products were to substantially increase, Canada could lose a major trading partner.
The record-low key interest rate has been in place since April 2009 and the bank plans to hold the rate steady until mid 2010.
Most recent Legal, regulatory, privacy Stories
- Using 'autofill' for card info is convenient, but is it safe? -- Your computer and your smartphone use autofill settings to make shopping online a breeze. But how safe is the technology? ...
- Is there privacy in a cashless society? -- Canadians favour plastic and mobile payments, but are we trading privacy for convenience? ...
- Are you being safe with your account info -- or paranoid? -- Data breaches, identity theft and other scary situations have become routine. We change passwords, get credit monitoring and shred documents. But is any of it over the top? ...