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."

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