Bank of Canada holds rate steady

The Bank of Canada is keeping its key interest rate on hold at 0.5% and says the resource sector continues to adjust to lower prices for oil and other commodities.

The central bank says economic activity continues to be underpinned by household spending and a firm economic recovery in the United States.

Read: Bearish sentiment growing

However, it noted that increased uncertainty about growth in China and other emerging markets is raising questions about the pace of the global recovery. It says the uncertainty is contributing to volatility on the financial markets.

The Bank of Canada says inflation has “evolved in line” with its expectations in the July monetary policy report and has remained near the bottom end of the target range, due to the drop in energy prices.

Read: Canadian unemployment up slightly

However core inflation, which excludes some of the most volatile items, has been close to the bank’s 2% target due to the drop in the Canadian dollar and some sector-specific factors.

“With the third quarter looking headed for nearly 3% growth, the next BoC meeting should similarly be non-eventful,” writes CIBC chief economist Avery Shenfeld in a note to analysts. “But we’ll need some evidence that the economy is still growing in Q4 before markets are likely to price out all risks of another rate cut in Canada.”

Read: Snapshot: Canadian economic data

Staff, with files from The Canadian Press

The Canadian Press is a national news agency headquartered in Toronto and founded in 1917.