Bank of Canada holds key rate as expected, Canadian dollar falls

  • The Bank of Canada left its key rate unchanged at 1%, as expected.
  • The BOC noted improvement in the jobs market following the unemployment rate’s drop to a nine-year low in November.
  • The BOC said it will continue to be cautious and data-dependent.

The Bank of Canada held its key interest rate at 1% as economists had expected.

In its statement on Wednesday, the BOC acknowledged recent improvement in the jobs market, and said it would maintain a cautious approach to raising rates that depends on incoming data.

Statistics Canada reported Friday that Canada’s unemployment rate fell to the lowest level since 2008 in November, and its economy added 441,400 new full-time jobs. “Employment growth has been very strong and wages have shown some improvement, supporting robust consumer spending in the third quarter,” the BOC said in its statement on Wednesday.

The BOC’s statement noted that the housing market continued to moderate, as expected. Starting in January, the federal government is tightening the rules governing who qualifies for a mortgage to cut the share of borrowers that default on payments.

Uncertainty about the housing market and NAFTA were expected to keep the BOC on hold. Also, the BOC raised rates in back-to-back meetings in July and September.

The Canadian dollar fell against the US dollar following the BOC decision, by 0.4% to 1.2744.

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