Loonie tumbles as Bank of Canada leaves rates unchanged, dwongrades economic outlook

The Canadian dollar remains weak after it tumbled in reaction to the Bank of Canada announcement on Wednesday that interest rates were left unchanged.

The benchmark rate was left at 0.5 percent, after the BoC cut rates twice this year. This was in line with most market expectations.

In explaining its reasoning, the bank said it kept its rate as is based on the impact of previous changes.

“Canada’s economy has rebounded, as projected in July,” the bank said in a statement. The low Canadian dollar has helped most Canadian industries outside the resources sector, and household spending is expected to increase at what the bank calls a “moderate pace” moving forward.

But what led investors to sell the Canadian dollar was that the BoC downgraded its economic expectations for the rest of 2015 and the two years beyond that.

The bank now thinks the economy will expand by one per cent in 2015, by two per cent next year and up to 2.5 per cent growth in 2017.
USDCAD rose to a high of 1.3145 early in Asian trading on Thursday.

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