Bank of Canada holds rates steady; says market volatility abating

The economic pieces are starting to fall into place for Stephen Poloz, giving the Bank of Canada governor latitude to keep the bank’s key interest rate unchanged.

Many of the dark clouds that have hung over Mr. Poloz’s decision-making in recent months have begun to clear. Exports are rebounding, fear of a global recession is fading and the battered price of oil is on the upswing again. The federal government is also poised to inject a hefty dose of fiscal stimulus to help revive the sluggish economy in its March 22 budget.

As a result, the central bank opted to keep its key overnight interest rate unchanged at 0.5 per cent Wednesday – where it’s been since last July when it cut rates for the second time in 2015...

Mr. Poloz and other bank officials have generally welcomed the prospect of more fiscal stimulus from Ottawa, which is expected to announce a multi-year boost to infrastructure spending.

Both the price of oil (at roughly $37 U.S. per barrel) and the Canadian dollar (just below 75 cents U.S.) are close to levels the bank forecast in January, the statement pointed out.

Still, the bank remains concerned about a number of things, including still “very weak” business investment due to massive retrenchment in the oil sands as well as rising “financial vulnerabilities.”...

This has been excerpted from the 9 March 2016 edition of The Globe and Mail.