by Steve Scherer and David Ljunggren
OTTAWA (Reuters) – The Bank of Canada opted for the status quo on its key rate on Wednesday, becoming the first major central bank to suspend its monetary tightening policy to fight against inflation which is tending to subside in line with forecasts.
The central bank’s overnight rate target was kept at the level set in January at 4.50%, the highest since December 2007.
Over the past year, the central bank has raised its rate at a record 425 basis points in an attempt to rein in rising prices, which peaked at 8.1% last summer and have since slowed to 5. 9% over one year in January. But inflation is still nearly three times higher than the institution’s 2% target.
At its monetary policy meeting in January, the Bank of Canada indicated that it would likely pause raising rates in March to assess the cumulative effect of past hikes, as long as inflation slows in line with its expectations.
“Overall, the latest indicators remain in line with the bank’s forecast of a slowdown in consumer price inflation around 3% at mid-year,” the institution said in a statement.
In the currency market, the Canadian dollar fell to a four-month low against the US dollar after the announcements from the Bank of Canada.
(Report Steve Scherer and David Ljunggren, with the contribution of Fergal Smith in Toronto and Ismail Shakil in Ottawa, Blandine Hénault for the French version, edited by)
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