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Bank holds rates, economists react Add to ...

Here are a couple of reactions from Canadian economists to the Bank of Canada's monetary policy statement on Thursday morning. While the bank's decision to hold its key interest rate steady at 0.25 per cent was expected, economists were more interested in what the bank had to say about inflation, the Canadian dollar and where interest rates are headed.

Sal Guatieri, senior economist, BMO Nesbitt Burns: "Presumably, the Bank retains a view that the economy won't return to productive capacity until [the third quarter of]2011, and that core inflation will remain below the 2 per cent target until then (with the risks still 'tilted slightly to the downside'). This means rates shouldn't rise for some time. Meantime, the Bank highlighted improvements in financial conditions and in business and consumer confidence as reasons not to employ unconventional policy measures."

Charmaine Buskas, senior economics strategist, TD Securities: "The Bank reiterated their statement that rates are likely to remain unchanged until the second quarter of 2010 but also that they do retain flexibility with regard to the conduct of monetary policy. All this suggests a 'steady as she goes' tone to Canadian monetary policy over the near term horizon, unless conditions measurably change. As such, we can only take the Bank of Canada at their word, and are tentatively encouraged by the not-so-bad data of late which supports the view that it will be a while before we see any change in the overnight rate."

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