FX168 Financial News Agency (North America) News On Wednesday (March 6), the Bank of Canada kept its benchmark interest rate at 5%, which was widely expected by economists, despite the central bank's progress in curbing inflation.

The decision marks the fifth time the central bank has kept its key interest rate at 5%.

Canadian inflation slowed more than economists expected in January, with annual price growth at 2.9%, but within the central bank's target range of 1% to 3%. The central bank's core inflation measure also slowed in January, suggesting price pressures are easing.

But Bank of Canada Governor Steve McCallum said the central bank needs "more assurance" that inflation is losing momentum before it will consider easing monetary policy.

McCollum said a rate cut would not be imminent. "It's too early to think about lowering interest rates," he said, adding that senior officials believed headline inflation would remain close to 3% until mid-year.

In a statement accompanying the decision on Wednesday, the Bank of Canada said the Governing Council "remains concerned about risks to the inflation outlook, particularly the persistence of underlying inflation."

"The Governing Council hopes to see further sustained moderation in core inflation and continues to focus on the economy's supply and demand balance, inflation expectations, wage growth and corporate pricing behavior," the central bank said.

Market Reaction:

USD/CAD fell nearly 30 points in the short term and is now at 1.35368.FX168

(USD/CAD 30-minute trend chart source: FX168)

Derek Halpenny, head of global markets, EMEA and international equity research at Mitsubishi UFJ Financial Group, said: "The gradual decline in USD/CAD certainly reflects in part the slowdown in the U.S. economy and the beginning of the Fed's rate-cutting cycle." "We Also assuming there is no hard landing (the economy), if risks remain broadly favorable this year, the Canadian dollar should also benefit."

Canada is a major exporter of commodities, including oil, so the Canadian dollar tends to be sensitive to swings in investor sentiment.

However, analysts said about 75% of Canada's exports go to the United States, so slower U.S. economic growth may not be the reason for the Canadian dollar's strength against G10 currencies other than the U.S. dollar.

"A slowdown in the U.S. economy and a weak U.S. dollar tend to cause the Canadian dollar to underperform against other G10 currencies," Halpenny said.

Attached: Overview of key points in the Bank of Canada’s interest rate decision

1. Summary of the statement: The Bank of Canada kept interest rates unchanged at 5.00% and will continue quantitative tightening. reiterated its desire to see a further and sustained slowdown in core inflation.

2. Interest rate outlook: It is still too early to consider cutting interest rates. More time needs to be given for higher rates to take effect.

3. Inflation outlook: Wage pressures have eased; inflation is expected to remain close to 3% until mid-2024, before beginning to slow in the second half of the year.

4. Economic Outlook: Canada’s economic growth was higher than expected in the fourth quarter, but the growth rate is still weak and below potential.

5. Market reaction: USD/CAD fell 30 points to 1.35368 in the short term, reaching a low of 1.35244.

6. Latest expectations: The money market believes that the possibility of the Bank of Canada cutting interest rates in April is 23%, down from 43% before the interest rate decision. ]]>