OTTAWA, Dec. 4, 2013 /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
The global economy is expanding at a modest rate, as the Bank expected.
Although growth in several emerging markets has continued to ease,
growth in the United States during the third quarter of 2013 was
stronger than forecast. Even if some of this pickup was due to
temporary factors, the data are consistent with the Bank's view of
gathering momentum in the U.S. economy.
In Canada, underlying growth is broadly in line with the Bank's
projections in its October and July Monetary Policy Reports. Real GDP growth in the third quarter, at 2.7 per cent, was stronger
than the Bank was projecting, but its composition does not yet indicate
a rebalancing towards exports and investment. The housing sector has
been stronger than expected but is consistent with updated demographic
data and a pulling forward of home purchases in light of favourable
financing conditions. The Bank continues to expect a soft landing in
the housing market. Non-commodity exports continue to disappoint and
the price of oil produced in Canada has eased further. Business
investment spending is up from previous low levels, but is still
recovering more slowly than anticipated. On balance, the Bank sees no
reason to adjust its expectation of a gradual return to full production
capacity around the end of 2015.
Meanwhile, inflation has moved further below the Bank's 2 per cent
target. Core inflation is being held down by significant excess supply
and by the effects of heightened competition in the retail sector,
which look to be more persistent than anticipated. In addition, total
CPI inflation has been pushed down by lower gasoline prices.
The risks associated with elevated household imbalances have not
materially changed, while the downside risks to inflation appear to be
greater. Overall, the balance of risks remains within the zone
articulated in October. Weighing these considerations, the Bank judges
that the substantial monetary policy stimulus currently in place
remains appropriate and therefore has decided to maintain the target
for the overnight rate at 1 per cent.
The next scheduled date for announcing the overnight rate target is 22
January 2014. The next full update of the Bank's outlook for the
economy and inflation, including risks to the projection, will be
published in the Monetary Policy Report at the same time.
SOURCE: Bank of Canada
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