OTTAWA, June 10 /CNW Telbec/ - The Bank of Canada today announced that it
is maintaining its target for the overnight rate at 3 per cent. The operating
band for the overnight rate is unchanged, and the Bank Rate remains at
3 1/4 per cent.
Since the April Monetary Policy Report (MPR), economic developments have
been broadly in line with expectations. However, the balance of risks to the
Bank's April projection for inflation in Canada has shifted slightly to the
upside. Although the composition of U.S. growth has not been favourable for
demand for Canadian goods and services, overall, global growth has been
stronger and commodity prices have been sharply higher than expected. At the
same time, many of the downside risks to inflation identified in the April MPR
have eased, while the evolution of credit conditions has been in line with
expectations. The risk remains that potential growth will be weaker than
With the decline in first-quarter GDP, the Canadian economy is judged to
have moved into excess supply, which is expected to increase this year.
Consistent with the April MPR, the Bank continues to project that economic
growth will pick up this year and accelerate in 2009, owing in part to a
firming of U.S. demand and accommodative monetary policy in Canada.
If current levels of energy prices persist, total CPI inflation will rise
above 3 per cent later this year. However, with the Canadian economy operating
in excess supply, core inflation is expected to remain below 2 per cent
through 2009. Both total and core inflation should converge on 2 per cent in
2010 as the economy returns to balance.
Against this backdrop, the Bank now judges that the current stance of
monetary policy is appropriately accommodative to bring aggregate demand and
supply into balance and to achieve the 2 per cent inflation target. There
continue to be important downside and upside risks to inflation in Canada,
which the Bank will monitor closely.
The Bank of Canada's next scheduled date for announcing the overnight
rate target is 15 July 2008. The Bank will publish an updated projection for
the economy and inflation, and its assessment of the risks, in the Monetary
Policy Report Update on 17 July 2008.
For further information:
For further information: Jeremy Harrison, (613) 782-8782