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Canada is keeping the interest rate at 1%

Mark Carney, the Governor of Bank of Canada had a public speech this week which caught the trader’s attention. As head of the central bank, he can release important information about the short term interest rate, indicator closely watched by traders which has a lot of influence over the currency’s nation value.

Why is important to pay attention to Canada? Primarily because is the world’s eleventh-largest economy, an exporter of energy with important resources of natural gas and oil. The export markets of Canada are United States and Asia.

Mark Carney assured Canadians that the economy of their country is doing well, with a moderate pace of growth. Because the economic relationship with some countries, the governor highlighted the world’s economic climate. Thereby, the economy of U.S. is continuing at a modest pace, with the Euro zone still sensitive, China slows and Japan adds to its economy important stimulus. The economic ties with U.S. are extremely important for Canada considering the fact that 70% of exports are oriented towards its neighbor. Because U.S. has important investments of capital and technology in Canada, it also added a high level of dependency and vulnerability to U.S. policies.

In other words, Canada’s economy is projected to grow during 2013 reaching full capacity in mid-2015 but with such an instable global economic climate, chances are high to see those predictions lowered soon. Still, the low inflation (1%) keeps the overall calm. The Bank of Canada is working to keep the inflation low and stable using the interest rate. Since April 2009 Canada established its interest rate target at 1% to which they added the stimulus spending by the federal government and a careful observation of the evolution of inflation. All these measures helped the country to be the first one to emerge from the recession (started in 2008). In present, the inflation target is 2% and the economy signals potential to fulfill this aim. Also, the level of the interest rate is projected to stay at the 1% for the rest of the year.

For next week we need to pay attention to the release of the GDP (30th of April) and Trade Balance (2nd of May), important economic indicators which will impact the value of the Canadian dollar.

Canada is keeping the interest rate at 1% by