Market Overview

2 April 2015

Interest rate in Canada to remain unchanged this month?

The Bank of Canada (BoC) unexpectedly lowered its interest rate to 0.75% from 1.0% on January 21. It was the first interest rate reduction since April 2009. Analysts had expected the second interest rate cut by the BoC. But it has not happened yet.

Canada's economy was hit by falling oil prices. But as oil prices had begun to stabilise in February, the economy has shown some signs of recovery. Canada's seasonally adjusted Ivey purchasing managers' index rose to 49.7 in February from 45.4 in January.

Consumer price inflation rose in February. Canadian consumer price index increased 0.9% in February, beating expectations for a 0.7% rise, after a 0.2% drop in January. Canadian core consumer price index, which excludes some volatile goods, increased 0.6% in February, exceeding expectations for a 0.5% gain, after a 0.2% rise in January.

The trade data was better-than-expected in February. Canada's trade deficit narrowed to C$0.98 billion in February from a deficit of C$1.5 billion in January.

But the employment remained weak in February. Canada's unemployment rate climbed to 6.8% in February from 6.6% in January.

It's unlikely that the BoC will lower its interest rate this month as the recent released economic data showed that the economy seems to recover. The economy in Canada might continue to recover if oil prices continue to stabilise. Falling oil prices may mean the further interest rate cut by the central bank.

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