Click on the link below to read CIBC’s Senior Economist Benjamin Tal’s latest Weekly Economic Report.

weekly-market-insight

The Bank of Canada kept its key lending rate at a record low as expected, cautioning that the strengthening currency could “fully offset” recent improvements in financial markets and consumer confidence, and prolong the recession.  Policy makers also reiterated they have no plan to change the rate over the next year, and that they still have flexibility to use other measures should more stimulus be needed.

“If the unprecedentedly rapid rise in the Canadian dollar, which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency, proves persistent, it could fully offset these positive factors,” the Bank of Canada said in a statement today from Ottawa.

Consumer and business confidence, prices for exported commodities and financial conditions have all improved in the past few weeks, but still, the recovery of the global and Canadian economies will be more muted than usual.  Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.  The bank retains considerable flexibility in the conduct of monetary policy at low interest rates.

The next interest rate announcement will be on July 21st.