Bank of Canada maintain overnight rate
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Recent economic data suggest that growth in the United
States has been slightly more robust than anticipated, largely as a result of
continued vigour in consumer spending and business investment.
Nonetheless, household deleveraging, fiscal consolidation
and negative spillover effects from the European crisis are all expected to
weigh on U.S. growth. Growth in China and other emerging-market economies
continues to be strong, although there are signs that it is moderating to a
more sustainable pace in response to weaker external demand and the lagged
effects of past policy tightening.
On balance, recent economic indicators in Canada suggest
that growth in the second half of this year is slightly stronger than the Bank
projected in October. Household expenditures have more momentum than had been
expected and business investment remains solid. Going forward, the weaker
external outlook is expected to dampen GDP growth in Canada through financial,
confidence and trade channels. The economy also continues to face
competitiveness challenges, including the persistent strength of the Canadian
dollar.
Although total CPI inflation has been slightly higher
than projected, the Bank continues to expect the inflation rate to decline as a
result of reduced pressures from food and energy prices and ongoing excess
supply in the economy. Core inflation has also been slightly firmer than
projected and is expected to ease as the output gap persists well into 2013.
Reflecting all of these factors, the Bank has decided to
maintain the target for the overnight rate at 1 per cent. With the target
interest rate near historic lows and the financial system functioning well,
there is considerable monetary policy stimulus in Canada. The Bank will
continue to monitor carefully economic and financial developments in the
Canadian and global economies, together with the evolution of risks, and set
monetary policy consistent with achieving the 2 per cent inflation target over
the medium term.
Information note:
The next scheduled date for announcing the overnight rate
target is 17 January 2012. A full update of the Bank’s outlook for the economy
and inflation, including risks to the projection, will be published in the MPR
on 18 January 2012.
This press release is now available on the Bank of
Canada’s website at:
http://www.bankofcanada.ca/2011/12/press-releases/fad-press-release-2011-12-06/
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