Bank Rate Raised in Response to Persistent Weakness in the Canadian Dollar
The Bank of Canada today raised the Bank Rate by 1/4 of one percentage point to 4 per cent. The Bank's operating band for the overnight rate was similarly adjusted.
Persistent weakness in the Canadian dollar since late October has resulted in a further easing in monetary conditions that were already highly stimulative. Given the underlying strength in the Canadian economy and the aim of having monetary conditions that support a long-lasting expansion, this further easing is inappropriate. Currency weakness may also put at risk the sustainability of the low level of Canadian medium-and longer-term interest rates compared to those in the United States.
This action is designed to counter the excessive easing in monetary conditions and to provide support for the Canadian dollar.