Citing strong “domestic demand growth” – tempered by a robust Canadian dollar and weak demand for exports in the United States continuing to act as “significant drags” on the economy, the Bank of Canada said it would maintain the historically low benchmark lending rate until mid-2010.
Canada’s economy grew at an annual rate of five percent in the fourth quarter of 2009 “spurred by vigorous domestic spending and further recovery in exports,” according to the statement released by the Bank.
Pointing to government stimulus spending, a boost to consumer spending, and overall improved financial conditions as being the drivers in the recovery, the Bank has not dismissed the potential for inflation creeping into the Canadian economy.
“The outlook for inflation should continue to reflect the combined influences of stronger domestic demand, slowing wage growth, and overall excess supply,” the central bank said.