Bank of Canada keeps central rate at 1%

OTTAWA, May 31 (UPI) -- Despite rising inflation, the Bank of Canada announced in Ottawa Tuesday it was maintaining its central rate of 1 percent.

A day after Statistics Canada reported inflation had increased on an annual basis by 3.3 percent in April, the bank revised its earlier position and said high energy prices and changes in provincial taxes are likely to keep the Consumer Price Index "above 3 percent in the short term."

The bank board, led by Gov. Mark Carney, noted the "persistent strength" of the Canadian dollar, several cents above the U.S. dollar, was hurting exports but making imports cheaper.

The statement said global conditions required vigilance in establishing lending rates.

"Commodity prices have declined recently but are expected to remain at elevated levels, supported by tight global supply and very strong demand from emerging markets," the bank said.

"These high prices, combined with persistent excess demand conditions in major emerging-market economies, are contributing to broader global inflationary pressures."

The bank said it was maintaining its forecast that inflation and the central bank rate would converge in mid-2012.