Bank Of Canada Holds Rates

Posted on April 15/2011 by

Canadians are in for more of the same, at least for now.

Citing such reasons as; the economy is not at full capacity and there is room still for growth, inflation is still manageable, signs of recovery in global economies are becoming more firmly entrenched, and while still unstable, have been balanced by stronger than expected domestic growth, and the strength of the Canadian dollar, the Bank of Canada again chose to hold rates, again.

According to a press release issued this morning by the Bank of Canada, “The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent. “

The Bank of Canada forecasts that the economy will grow by” 2.9 per cent in 2011 and 2.6 per cent in 2012. Growth in 2013 is expected to equal that of potential output, at 2.1 per cent.”

Similarly, they believe that the economy will reach capacity by mid- 2012.

Domestic activity has been stronger than the Bank expected recently; globally, many of the troubled economies are starting to reach more stable ground, and are looking more promising- although they expect that a slow recovery in the U.S. may have an adverse effect on the rest of the world economies.

And too, the continuing strength of the loonie will have impact on imports and exports: “The persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.”

“Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of material excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.”

Mark Carney did indicate that tightening measures, and rate increases will be coming at some point, but did not indicate when. Many analysts predict that it will be summer time before we see rates begin to climb.


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