The Canadian dollar fell below 75 cents U.S. for the first time in 18 months on Wednesday after the Bank of Canada announced that it is standing pat on interest rates for the time being.
In announcing its decision, Canada’s central bank said that it still needs time to fully assess the impact of its previous interest rate increases, as well as the effects of lower oil prices on the domestic economy before making any further adjustments to interest rates.
The Bank of Canada’s benchmark interest rate — known as the target for the overnight rate — remains at 1.75%. The central bank raised its rate to that level in October, and has hiked rates five times since the summer of 2017. The central bank rate affects the interest rates that commercial banks charge Canadian consumers on everything from mortgages to credit cards.
Economists polled by Bloomberg News forecasts that the Bank of Canada would leave interest rates unchanged for now. The Canadian dollar reacted to the news by dropping more than half a cent, falling below 75 cents U.S. and to its lowest level since May 2017.
The Bank of Canada is scheduled to announce its next decision on interest rates on January 9. Bloomberg News forecasts that there is a 50% chance of a rate hike in January 2019.
