“Risks to the outlook for inflation are now roughly balanced and risks to financial stability appear to be evolving as expected,” the Bank of Canada wrote in an official release. “The Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore is maintaining the target for the overnight rate at 3/4 per cent.”
The total CPI inflation is at one per cent, due to a drop in consumer energy prices and core inflation has hovered around 2 per cent over the past few months, according to the BoC.
“The Canadian economy is estimated to have stalled in the first quarter of 2015,” the Central bank wrote. The Bank’s assessment is that the impact of the oil price shock on growth will be more front-loaded than predicted in January, but not larger.”
The BoC also stated it will continue to monitor the impact oil price shock will have on the economy. However, it is expecting a the economy to rebound in the coming months.
“As the impact of the oil shock on growth starts to dissipate, this natural sequence is expected to re-emerge as the dominant trend around mid-year,” the BoC wrote. “Real GDP growth is projected to rebound in the second quarter and subsequently strengthen to average about 2 1/2 per cent on a quarterly basis until the middle of 2016. The Bank expects real GDP growth of 1.9 per cent in 2015, 2.5 per cent in 2016, and 2.0 per cent in 2017.”
It’s a different tune than the one sung in January, when the Bank of Canada shocked the country by cutting its long-held rate by ¼ per cent.
Despite a “stalled” economy in the first quarter of 2015, the Bank of Canada revealed some optimism as it held steady the target for the overnight rate.