It is not beyond the realm of possibility, given the trajectory of the Canadian economy, and in fact it might have been a closer call following last week’s policy meeting than thought, writes the Financial Post‘s Gordon Isfeld.

After 18 months of telling consumers and markets that its key interest rate would eventually be lifted from 1%, close to rock bottom, the Bank of Canada shifted gears into neutral. But it could just as easily have swung in the opposite direction, perhaps dropping 25 basis points, if the economic climate in Canada was more predictable.

“If it were not for the concerns about household imbalances, the BoC would have cut its policy rate at last week’s [policy] meeting,” says Nomura Securities economist Charles St-Arnaud. Add to those concerns the fact that inflation is stubbornly at the low end of the bank’s 1-to-3% target range — 2% being the preferred level — and that the economy is growing at a disappointingly slow pace in the absence of stronger corporate investment, it looks like the 1% solution will be with us for a while yet.

Source Financial Post