As the Canadian dollar inches towards parity with its U.S. counterpart, the Bank of Canada announced today it will keep the interest rate at its current unprecedented low level for the near future.
While this is good news for consumers and domestic trade, it means that the dollar will likely stay high, reducing the attractiveness of Canadian exports on the world market.
“Heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures,” the Bank of Canada said in a statement. “The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.”
The key policy rate is expected to stay at 0.25 percent until June 2010.
The Bank will update its Monetary Policy Report on Thursday, which will detail its outlooks and projections on the economy.
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