OTTAWA, Sept. 3, 2014 /CNW/ - 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.
Inflation is close to the 2 per cent target and is evolving as the Bank
anticipated in its July Monetary Policy Report (MPR). Recent data reinforce the Bank's view that the earlier pickup in
inflation was attributable to the temporary effects of higher energy
prices, exchange rate pass-through, and other sector-specific factors
rather than to any change in domestic economic fundamentals.
The global economy is performing largely as expected. The recovery in
Europe appears to be faltering as the situation in Ukraine weighs on
confidence. In the United States, a solid recovery seems to be back on
track, with business investment now making a significant contribution
to growth. Global financial conditions remain very stimulative and
longer-term bond yields have eased even further.
In Canada, stronger growth in the second quarter has brought GDP to
almost exactly the level the Bank had projected in July's MPR. Canadian
exports surged in the second quarter after a weak winter, supported
notably by stronger U.S. investment spending and the past depreciation
of the Canadian dollar. While an increasing number of export sectors
appear to be turning the corner toward recovery, this pickup will need
to be sustained before it will translate into higher business
investment and hiring. Meanwhile, activity in the housing market has
been stronger than anticipated. The Bank still expects excess capacity
in the economy to be absorbed during the next two years.
Overall, the risks to the outlook for inflation remain roughly balanced,
while the risks associated with household imbalances have not
diminished. The balance of these risks is still within the zone for
which the current stance of monetary policy is appropriate and
therefore the target for the overnight rate remains at 1 per cent. The
Bank remains neutral with respect to the next change to the policy
rate: its timing and direction will depend on how new information
influences the outlook and assessment of risks.
The next scheduled date for announcing the overnight rate target is 22
October 2014. The next full update of the Bank's outlook for the
economy and inflation, including risks to the projection as well as the
Bank's annually-updated estimate of the economy's potential, will be
published in the MPR at the same time.
SOURCE: Bank of Canada
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