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Updated May 20th, 2016
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Bank of Canada holds key interest rate steady at 0.5%

Bank of Canada holds key interest rate steady at 0.5%
CBC - January 20th, 2016

The Bank of Canada today maintained its benchmark interest rate at 0.5 per cent.

The bank's rate is officially called the "target for the overnight rate." Technically, it only governs the rate that retail banks charge each other for short-term loans, but has a strong impact on the rates that Canadians get from their lending institutions when they save or borrow money.

The central bank cut its rate twice last year in an attempt to stimulate the economy.

Headed into the decision, economists were evenly split as to whether the bank would cut again or stand pat. The Canadian dollar jumped about half a cent on the rate news — a sign that investors were worried about a rate cut, and priced it into the value of the currency.

When the central bank didn't cut the key lending rate, it marked a vote of confidence in the loonie, which rose to 68.89 cents US. But within an hour of the rate announcement, the loonie was back in the red at 68.63 cents US.

It finished the day up again at 69.03 cents US, as traders absorbed the news that the central bank sees modest growth ahead.

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