Bank of Canada Retains 0.5% Interest Rate Target and Lowers Projected Growth and CPI Path

October 19, 2016

The statement released by monetary officials projects GDP growth of 1.1% in 2016, down from a prior projection of 1.3%. Growth in 2017 and 2018 have been reduced to 2.0% from 2.2% and 2.1%, respectively.  The change reflects slower near-term housing resale activity and a lower export trajectory. Growth is now surpassing potential, but spare capacity will not be eliminated until mid-2018, six months later than assumed in the prior forecast. Regarding inflation, “the Bank expects total CPI inflation to be close to 2 per cent from early 2017 onwards, when these temporary factors will have dissipated, but downward pressure on inflation will continue while economic slack persists.”  All this means that officials can afford to keep their accommodative stance for the time being. A new Monetary Policy Report was published.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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