Highlights
As expected, the Bank of Canada kept its key interest rate at 2.5 percent where it has been since October 19.2004. Inflation remains under control but economic growth has been hit hard by the high flying Canadian dollar. The dollar has hit exports while making imports more affordable. Bank of Canada Governor David Dodge recently said that the Bank would move more slowly than it had expected on raising rates, because of the stronger Canadian dollar's effect of helping to lower exports and increase imports. But he also said current rates remain historically low and that they inevitably at some point will have to go up.

In its statement, the Bank said: "Since the release of the January Monetary Policy Report Update, the accumulated information on the Canadian and global economies has been broadly consistent with the Bank's expectations. Although the Canadian National Accounts indicated that output growth in the fourth quarter of 2004 was somewhat lower than anticipated in the Update, upward revisions to growth earlier in the year imply a level of economic activity at year end that is in line with the Bank's expectations. The outlook for the Canadian economy and inflation, the analysis of the factors at play, and the implications for the pace of reduction in monetary stimulus are essentially unchanged from those that the Bank presented in January's Update. Consistent with this assessment, the Bank decided to leave the target for the overnight rate unchanged."