Canadian Monetary Policy on Hold

September 7, 2011

The Bank of Canada left its overnight money target at 1.0%.  That level, as well as a 1.25% Bank Rate and a 0.75% deposit rate, have been maintained for a year, following hikes of 25 basis points implemented in June, July, and September 2010.  Today’s statement from officials said that several downside risk possibilities identified in July had indeed been realized.  While temporary factors were mostly responsible for the zero rate of economic growth in 2Q11, officials now anticipated weaker second-half growth than assumed previously, a slow drawdown of excess capacity and less inflationary pressure.  Core inflation will remain well contained.  The next scheduled policy announcement is on October 25 and will be followed a day later by a full update of the Bank’s outlook for the economy and inflation.  It will be considerably longer before rates are raised.  If the global economy slides into recession, the next move could even be an ease.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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