Canada's central bank keeps key interest rate unchanged

AP News
Posted: Jan 20, 2016 10:36 AM

TORONTO (AP) — Canada's central bank has kept its key interest rate unchanged.

Some analysts thought the Bank of Canada might cut the rate as the economy continues to be dragged down by the plunge in oil prices. But the Canadian dollar has plummeted along with the price of oil, and the bank may not have wanted to see a further sharp decline in the currency.

The trend-setting policy rate sits at 0.5 percent. Bank governor Stephen Poloz dropped the rate twice last year to absorb the impact of sliding oil prices.

The bank also downgraded its 2016 growth projection to 1.4 percent from its fall forecast of 2 percent.

Canada is the world's 11th-biggest economy. New Liberal Prime Minister Justin Trudeau has vowed to spend billions on infrastructure in an effort to stimulate the economy.

"The Bank highlights that their forecasts do not yet incorporate the fiscal stimulus that's likely coming in the next federal budget, suggesting that Governor Poloz is willing to wait to see what the finance minister provides as a bolster to the economy before pulling the trigger on any more monetary easing," CIBC economist Nick Exarhos said in a note.