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Bank of Canada keeps interest rate at 1%

The Bank of Canada kept its benchmark interest rate at one per cent on Wednesday.

That's the rate on which other retail banks base their rates for savers and borrowers.

The rate, known as the target for the overnight rate, sets the terms at which banks can borrow from the central bank and each other for short-term loans.

The rate has been at that level for more than three years, dating back to September 2010. The bank meets every six weeks to decide on interest rates, and has now decided to leave the rate unchanged for 26 consecutive meetings — its longest stretch of inaction ever.

Broadly, the bank lowers the rate when it wants to stimulate the economy, and raises it when it wants to slow down growth.

"The Bank continues to expect a soft landing in the housing market," the bank said in a statement announcing its decision. "The downside risks to inflation appear to be greater," it added.

Reacting to the move, BMO economist Benjamin Reitzes says the statement is a sign the bank is leading toward cutting rates, not raising them.

"Overall, the bank’s economic outlook hasn’t changed materially, leaving no reason to adjust its expectation of a gradual return to full production capacity around the end of 2015," Reitzes noted.

The Canadian dollar lost a little ground on the news, trading around the 93.77 cents US level.


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