In contrast to the Reserve Bank of Australia, the Bank of Canada decided to keep rates at the historical low level of .25% and the strength of the Canadian $ seems to be the main motivation. The RBA spent more time focused on the possible imprudence of keeping rates at emergency levels when it was no longer necessary and was afraid of the imbalances to the economy low rates can create instead of the ancillary impact of a stronger currency due to higher rates. The BoC in contrast is worried that the strong Canadian $ is working to slow growth that is under way in Canada and they thus believe that “the composition of aggregate demand will shift further towards final domestic demand and away from net exports.” The strong currency is also giving them comfort that it will subdue inflation pressures and thus gives them room to keep rates very easy.
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