The Bank of Canada kept interest rates on hold today despite widespread expectations of a cut.
The Canadian dollar, also called the loonie, rose 0.7 per cent against the US dollar. It now buys $0.6891.
Interest rates were kept at 0.5 per cent, with the Canadian central bank confident that the economy would quickly adjust to lower oil prices. It said:
Prices for oil and other commodities have declined further and this represents a setback for the Canadian economy. GDP growth likely stalled in the fourth quarter of 2015, pulled down by temporary softness in the U.S. economy, weaker business investment and several other temporary factors. The Bank now expects the economy’s return to above-potential growth to be delayed until the second quarter of 2016
Reorientation towards non-resource activity is underway, helped by stronger US demand, the lower Canadian dollar, and accommodative monetary and financial conditions.
The Canadian dollar has fallen 17 per cent against the US dollar over the past 12 months. The last time the Bank of Canada's interest rate was below 0.5 per cent was under the helm of Mark Carney, current governor of the Bank of England.