The Bank of Canada kept its trendsetting overnight interest rate at one per cent today, the same place it's been for the last 29 policy meetings.
Known as the target for the overnight rate, the central bank's main rate dictates the rate that banks pay to each other for short-term loans. But it impacts the rates that banks offer to borrowers and savers in the real economy, for things like mortgages and savings accounts.
The rate hasn't changed since September 2010.
'The [bank] is leaving the door open to rate cuts even if that’s just a sliver of an opening in our view' - Scotiabank
Although indicators don't seem to have changed enough, in the bank's view, to warrant a change to the rate, a closer look at the language of the statement that accompanied the decision offers a hint at the bank's line of thinking.
Bank of Canada governor Stephen Poloz and his deputies appear to be a little less worried about overly low inflation, too high house prices and household debt. They also seem more confident in the sustainability of the recovery, and that stronger U.S. demand and the lower Canadian dollar will start to benefit exporters, particularly manufacturers.
Canadian dollar down
After highlighting the dangers of high consumer debt and frothy house prices through most of 2012 and 2013, the bank says that, while the danger has not fully passed, it is less worried about a severe correction that would sideswipe the economy.
"Recent developments are in line with the bank's expectation of a soft landing in the housing market and stabilizing debt-to-income ratios for households," it judges.
The bank ended its statement by repeating a line from its last decision six weeks ago, which was that "the timing and direction of the next change to the policy rate will depend on ... new information." At first blush that appears neutral, but Scotiabank's economics team says its the most important takeaway of the entire statement.
"The final sentence of prior statements was retained intact and continues to say that the [bank] is leaving the door open to rate cuts even if that’s just a sliver of an opening in our view," Derek Holt said.
Others are not as sure that when the bank eventually moves, it will be a cut as opposed to a hike.
"This outlook remains broadly unchanged from the last [monetary policy report] and TD Economics continues to expect the next interest rate hike to come in the second half of 2015," TD Bank economist Leslie Preston said.
Overall, the central bank now expects the Canadian economy to expand by 2.3 per cent this year and 2.5 next. The first figure is slightly down from the 2.5 per cent forecast the bank had the last time it revealed its assumptions.
The Canadian dollar had been modestly higher before the announcement, and gave up those gains following the announcement, trading down about a fifth of a cent to just under 91 cents US.