BoC keeps key rate on hold at 0.5%

The Bank of Canada kept its key interest rate on hold at 0.5%. The central bank said that risks to inflation remained roughly balanced, despite a renewed decline in oil prices and sluggish economic growth. The BoC expects inflation to climb to 2% by early 2017, while core inflation would remain around 2%. Meanwhile, declines in oil prices and other commodities represented a setback for the Canadian economy. The economic growth likely stalled in the final quarter of 2015, pulled down by temporary softness in the US economy, moribund business investment and several other temporary factors. The BoC now expects the economy's return to above-potential growth to be delayed until the second quarter of 2016. The central bank projects that the nation's economy will grow by about 1.5% in 2016 and 2.5% in 2017.

Canada's manufacturing sales rose more than expected in November, halting a three-month falling streak. According to Statistics Canada, manufacturing sales increased 1.0%, compared with economists' expectations for a 0.5% gain. November's growth in manufacturing sales was boosted by a 3.8% advance in motor vehicle sales, which benefited from a decision by automakers to focus on higher value models. Sales were 18.0% higher than in November 2014. The motor vehicle industry's share of the total manufacturing sector in November was 10.9%, the highest since the 11.3%seen in March 2007.