Bank of Canada holds rate at 1% as outlook worsens

The Bank of Canada has kept it's target for the overnight rate steady at 1%. This means that the Bank of Canada prime rate remains at 3%.

The BoC sited a worsening global economy and the need to maintain the current level of stimulus. The Bank also hinted that they may have to keep the benchmark interest rate this low for an extended period of time which is a surprise to many, as we had been expecting a rate hike sooner than later.

The Bank of Canada said that the risk to Canada's economy were roughly balanced, therefore no need for a change to the rate was required at this point.

Debt troubles in Europe continue to have an effect as does the slow down in the USA and emerging markets and Canada's export-driven economy is heavily dependent on all these markets for growth.

It was the 9th consecutive time that the Bank of Canada has decided to hold the rate at 1%.

"Our base case remains that the Bank of Canada will keep rates unchanged until the start of 2013", says BMO economist Michael Gregory. "If anything, today's announcement increases our convictions."

To read the full article from CBC click here.

No rate hikes till Summer of 2012: Reuters poll

The forecast for the next Bank of Canada interest rate hike was pushed back to the 3rd quarter of 2012 based on a recent Reuters poll of 40 economists and strategist in August 2011. This was based on slow global growth and the risk that Europe's debt crisis will linger on, according to the Reuters survey released on Tuesday.

Analysts said Canada's central bank need to raise borrowing costs less than they previously thought, because the domestic economy has not recovered as strongly as expected and the European debt crisis still is dampening the global outlook.

The poll showed a 95 percent probability there won't be a change in rates at the next policy announcement on October 25.

Click here to read the complete article from Reuters.