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Bank of Canada set to make key interest rate decision

The Bank of Canada in Ottawa.
The Bank of Canada in Ottawa. THE CANADIAN PRESS/Adrian Wyld

OTTAWA – The Bank of Canada is expected to make its latest announcement on interest rates later today.

And while there is little expectation of a change to its overnight rate target, economists will be looking for any clues as to how the central bank views the economy.

The Bank of Canada’s key interest rate stands at 0.5 per cent after being cut twice last year.

The announcement comes two weeks before a federal budget that is expected to open the spending faucets for infrastructure projects in an effort to stimulate the economy.

MORE: Ottawa can afford to inject $35 billion of stimulus into economy 

During its monetary policy report in January, the central bank lowered its economic growth projection for this year to 1.4 per cent from two per cent.

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Governor Stephen Poloz said at the time that any fiscal measures contained in the federal infrastructure spending plan could bump that forecast.

‘The Canadian economy still has a doughnut hole in the middle, but there’s some fresh icing on the rest of it’

CIBC chief economist Avery Shenfeld said in a research note last week that he expects the bank to deliver a “dovish” message in its announcement.

“The Canadian economy still has a doughnut hole in the middle, but there’s some fresh icing on the rest of it. The hole is the space vacated by a plunge in energy sector investment spending and the resulting job losses in the oilpatch, both of which are slated to continue, with the recent climb in crude immaterial so far,” Shenfeld said.

“But the icing has been that the rest of the economy looks a bit brighter than some expected, and that exports are beginning to provide a much needed lift.”

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