BoC changes forward guidance language, but keeps rate and expectations unchanged

OTTAWA – The Bank of Canada is keeping its trendsetting interest rate unchanged at one per cent in its first policy announcement under new governor Stephen Poloz.

But the Poloz influence was evident in the explanatory note to the announcement, which dropped the reference that interest rates are likely to remain unchanged for a period of time.

Instead, the new governor makes clearer that as long as considerable slack remains in the economy, inflation remains muted and household finances continue to improve, he intends no changes.

The overall impact of the language change is open to question, however, as the bottom line appears to remain the same — Canadians shouldn’t expect any changes to interest rates for some time.

The statement and release of a new quarterly outlook also suggests the new Poloz bank sees the world in much the same way as the old Mark Carney bank.

Although the bank’s new outlook raises this year’s growth forecast to 1.8 per cent from the previously projected 1.5 expectation, that is almost entirely due to a stronger than anticipated first quarter.

The bank sees the economy expanding at a rate of 2.7 per cent in 2014 and 2015, little different from the April forecast of 2.8 and 2.7 growth in the two years.

The bank continues to anticipate that the Canadian economy won’t return to full capacity until mid-2015.