Uncertain outlook keeps Bank of Canada firmly on sidelines for now

The Bank of Canada kept its benchmark interest rate steady on Wednesday, but signalled that could change once the weak U.S. economy starts to rebound as expected through the latter part of the year.

Canada's central bank kept its target for the overnight rate steady at 0.5 per cent on Wednesday, the same level it's been at since the middle of 2015, because the economy isn't showing any signs of needing any more or any less stimulus.

"All things considered, [the bank] judges that the current degree of monetary stimulus is appropriate at present," the banksaid in a statement.

"There's one very clear message in this statement and that is that theBank of Canada is not spooked," Manulife's senior economist Frances Donald said in an interview after the bank's decision came out.

The bank cited lower inflation caused by cheaper food as a factor in staying on the sidelines, but saidit expects that to change soon.And the U.S. economy that started the year on a "weak" note will likely strengthen and"rebound in the second quarter," the bank said.

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That should provide a shot in the arm to Canadian exports, which may require a change to the bank's lending rate. Generally speaking, the bank hikes its rate when the economy is heating up too much, and slashes the rate when it wants to stimulate the economy. Most economists expect the bank to stay on the sidelines until 2018 before tinkering with its interest rate.

The bank's statement was uncharacteristically brief it was the second-shortest in governor Stephen Poloz's tenure, Donald noted and that's a sign that the bank didn't want to say anything that might spook jittery investors.

Concerns over trade disputeswith the U.S., and elevated house prices have garnered a lot of attention for Canada among international investors of late, Donald noted, which is why the bank's statement was clearly targeted at assuaging those fears.

"What this statement does is reassure global investors that Canada is just fine," she toldCBC News. "That's a very important signal for the rest of the world."

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Federal and provincial governments have recently unveiled new rules taking aim at runaway home prices, particularly in Ontario, and the bank's statement was careful to mention those moves while also conveying a sense of calm.

"Macroprudential and other policy measures have yet to have a substantial cooling effect on housing markets," the bank said.

That's the bank's way of saying it "expects housing to slow in response,"economist Sherry Cooper of Dominion Lending Centres said.

The cautious message appears to have worked at least in the short term as the Canadian dollar gained more than a third of a cent to trade at 74.37 cents US on Wednesday morning.