USDCAD HOVERS AROUND FOUR MONTH LOW, BANK OF CANADA KEEPS INTEREST RATES UNCHANGED

Published on Sep 07, 2023 12:16

The Canadian Dollar was little changed after the Bank of Canada maintained its monetary policy steady yesterday. The broad based strength in the US dollar index also ensured that the USDCAD pair remains around a four month high of 1.3630. The Bank of Canada held its target for the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is also continuing its policy of quantitative tightening.

The central bank noted that inflation in advanced economies has continued to come down, but with measures of core inflation still elevated, major central banks remain focused on restoring price stability. The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures. Economic growth slowed sharply in the second quarter of 2023, with output contracting by 0.2% at an annualized rate. This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country.