TORONTO – The Canadian dollar closed lower Wednesday as the U.S. Federal Reserve offered some reassurance that it is in no hurry to raise short-term rates near zero, where they have been since the 2008 financial crisis.
The loonie was off 0.02 of a cent at 85.92 cents US as the greenback strengthened after the Federal Reserve promised to be “patient” in determining when to raise its key interest rate. The Fed said that this “patient” approach is consistent with what it called its “previous” guidance that it expected to keep the rate near zero for a “considerable time.”
It’s generally expected the Fed will move to hike rates sometime next year, around mid-2015. But a string of strong economic data points, including November’s blowout employment report, had suggested the Fed could move to increase rates sooner than expected.
The Fed also said that the timing of such increases depends on economic data.
Meanwhile, inflationary pressures in the United States remain very tame. The consumer price index for November was down 0.3 per cent from the month before. Economists had expected a drop of 0.1 per cent.
Inflation rose at an annualized pace of 1.3 per cent. That is well below the two per cent level that the Federal Reserve and most other central banks target.
Oil prices ticked higher for a second day as the market continues to sort out a huge supply/demand imbalance that has cut prices by more than 50 per cent since summertime highs. The January crude contract on the New York Mercantile Exchange climbed 54 cents to US$54.67.
Metals also advanced with March copper up one cent to US$2.87 a pound while February gold gained 20 cents to US$1,194.50 an ounce.