Highlights
As expected, The Bank of Canada left its key overnight interest rate at 2.5 percent. The Bank had increased its rate by 25 basis points in both September and October of 2004. Reports showing a slowdown in growth suggest that the export-reliant economy is suffering from the Canadian dollar's appreciation against the U.S. dollar that makes Canadian exports more expensive. Exports represent 40 percent of the economy.

In its statement the Bank said --
"The Canadian economy continues to adjust to major global developments. Recent data suggest that Canada's economic growth in the fourth quarter of 2004 was marginally weaker than previously expected, owing partly to a somewhat more pronounced adjustment to the past appreciation of the Canadian dollar. Since the December fixed announcement date, the Canadian dollar has continued to trade in a higher range than was observed prior to the October Monetary Policy Report (MPR). In large part reflecting the consequences for aggregate demand of this higher exchange rate, the Bank now expects the Canadian economy to operate a little further below its full production capacity in 2005 than was anticipated in the last MPR. Against this background, the Bank decided to leave the target for the overnight rate unchanged."