Bank of Canada holds key interest rate at 1% - Action News
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Bank of Canada holds key interest rate at 1%

The Bank of Canada keeps its key interest rate at one per cent, the same level it has been at for four years.

Benchmark rate has stayed the same for 4 years

Canada's central bank held its key interest rate at one per cent Wednesday, the same level is has been at for four years.

In its latest policy decision, the Bank of Canada also kept its neutral stance, which means that governor Stephen Poloz has no plans to raise or lower rates anytime soon.

The central bank says the risks to the outlook for inflation and household debt remain the same as before.

"The balance of these risks is still within the zone for which the current stance of monetary policy is appropriate," said the bank's statement. "The bank remains neutral with respect to the next change to the policy rate: its timing and direction will depend on how new information influences the outlook and assessment of risks."

The rate has been at one per centsince September 2010, the longest pause in Canadian history.

Retail banks use the overnight benchmarkfor setting theirprimelendingrate, or the rate they pay to each other for short-term loans. That can affect how much interest consumers pay on things like credit card debt and mortgages.

Although the bank is stuck in neutral, Bank of Montreal chief economist Doug Porter notes the bank seems to be more positive than it has been this year.

"The economy clearly perked up in recent months, pulled along in the slipstream of an improving U.S. backdrop. The overall tone is thus slightly less dovish than recent statements," said Porter.

Exports 'turning the corner'

Growth in Canada wasalmost exactly in line with the bank's expectations in the second quarter.

Last week,Statistics Canada reported the economy grew by an annualized 3.1 per cent,the strongest pace since2011.

Exports, which have been a consistent area of concern forPoloz, were a main driver, surgingby4.2 per cent in the quarter after declining by 0.2 per cent in the first three months of the year.

But according to the bank, "this pickup will need to be sustained before it will translate into higher business investment and hiring."

The bank says the global economy is chugging along at an expectedly mixed pace, with strong business investment driving the U.S. recovery and the situation in Ukraine weighing on Europe.

Rate hike expected in 2015

Economists generally share the same consensus that the central bank will begin to raiseit key ratenext year in lockstep with the U.S. Federal Reserve.

"The bank continues to be perfectly content biding its time until the Fed finally moves rates off the floor, and that event looks to be a mid-2015 affair," said Porter.