Bank of Canada keeps target for the overnight rate at 4 1/4 per cent



    OTTAWA, April 24 /CNW Telbec/ - The Bank of Canada today announced that
it is maintaining its target for the overnight rate at 4 1/4 per cent. The
operating band for the overnight rate is unchanged, and the Bank Rate remains
at 4 1/2 per cent.
    Growth of the Canadian economy has been essentially in line with the
Bank's expectations as set out in the January Monetary Policy Report Update.
But inflation has been higher than expected. Pressures on capacity over the
past year have been stronger than previously judged. Also, food and gasoline
prices have recently risen more than expected. After considering the full
range of indicators, the Bank now judges that the Canadian economy was
operating just above its production capacity in the first quarter of this
year.
    Robust domestic demand continues to support Canada's economic growth.
Stronger-than-expected growth outside North America has led to rising demand
for, and prices of, many commodities. However, the slowing U.S. economy has
had a moderating effect on growth in Canada.
    Over the projection horizon, domestic demand is the main driver of growth
in Canada. With the U.S. slowdown now expected to be somewhat more prolonged
than previously projected, net exports should exert a slightly greater drag on
growth in 2007. The Canadian economy is projected to grow by 2.2 per cent in
2007 and 2.7 per cent in both 2008 and 2009, returning to its production
capacity in the second half of 2007 and remaining there through 2008 and 2009.
Core inflation is projected to decline to 2 per cent by the end of 2007. Total
CPI inflation is projected to rise above the 2 per cent inflation target in
the second half of this year, before returning to the target by mid-2008.
    The upside risk to the Bank's inflation projection is that the recent
strength of inflation could be more persistent than projected. The downside
risk continues to come from the possibility of a more pronounced slowdown in
the U.S. economy. The Bank continues to judge that the risks to its inflation
projection are roughly balanced, although there is now a slight tilt to the
upside.
    The current level of the target for the overnight rate is judged, at this
time, to be consistent with achieving the inflation target over the medium
term.
    A full analysis of economic and financial developments, trends, and risks
will be set out in the Bank's Monetary Policy Report, to be published on
26 April 2007.

    Information note:

    The Bank of Canada's next scheduled date for announcing the overnight
    rate target is 29 May 2007.




For further information:

For further information: Jeremy Harrison, (613) 782-8782


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