[ForexNews]

The Bank of Canada left the overnight rate unchanged at 0.25%, as widely expected. In addition, they also retained their conditional commitment to keep rates unchanged until the end of the second quarter of 2010.

The statement did acknowledge that growth in the second half of 2009 is looking better than originally anticipated.

The comments about the currency were not significantly different from recent statements. They are still generally uncomfortable with the persistent strength of the Canadian dollar.

The Bank maintained the “considerable flexibility” statement, though unless economic conditions take a sharp reversal it is unlikely to be employed.

The Bank of Canada left the overnight rate unchanged at 0.25% which was priced into market expectations. In addition, the Bank also retained their conditional commitment to hold the current policy rate until the end of the second quarter of 2010. Moreover, they kept the phrase that they retain “considerable flexibility” with regard to the conduct of monetary policy, though that is increasingly unlikely to be employed. Given that the move was priced into expectations, there was only very little change in the statement, though it looks awfully similar to prior statements.

One of the key ways that the statement shifted was with regard to the Bank’s interpretation of economic conditions. The Bank acknowledged that the economic landscape has improved, thanks to simulative monetary and fiscal policy, better financial conditions, rebounding consumer and business confidence, which are supporting domestic demand. As such, the outlook for the second half of 2009 could ultimately be stronger than the Bank originally expected in July. However, the CPI outlook did not change significantly and the Bank does not expect headline CPI to return to the 2% target until the second quarter of 2011. This suggests that the broader outlook is little changed.

The statement on the Canadian dollar acknowledged its “persistent strength” which remains a risk to growth and to the return of inflation to target. But nothing more was said on the subject. Given the recent rhetoric by Bank of Canada officials, it sounds as if the Canadian dollar remains a variable that is being tracked closely, but unless the moves become a lot more pronounced or rapid, it is unlikely to yield any policy manoeuvres.