Canada Keeps Key Interest Rate at 1%, Sees Diminished Need for Increase

The Bank of Canada kept its main interest rate unchanged for an eighth meeting and said there is a “diminished” need for an increase as Europe’s fiscal crisis and a slow U.S. rebound hobble the global recovery.

The Ottawa-based central bank left the target for overnight loans between commercial banks at 1 percent, where it has been since last September, as forecast by all 27 economists surveyed by Bloomberg News.

The world’s 10th largest economy shrank in the second quarter as a strong dollar and weak U.S. demand weighed on Canada, which depends on exports for one-third of its output. The central bank’s decision echoed signals sent by policy makers in Sweden, Australia and Japan.

“In light of slowing global economic momentum and heightened financial uncertainty, the need to withdraw monetary policy stimulus has diminished,” the bank’s governing council, led by Governor Mark Carney, 46, said in a statement today.

The Bank of Canada reiterated today it expects economic growth to resume in the second half of this year, led by business investment and consumer spending. Output shrank at an annualized 0.4 percent rate in the second quarter, which the bank said was “largely due to temporary factors.”