Bank of Canada Keeps Key Interest Rate Unchanged

The Bank of Canada has announced to keep its key lending rate untouched at one per cent. Official announcement was made on Tuesday morning, in a statement which also explained that U.S. economy is increasing at a “gradual pace,” a little “continued contraction” in Europe, and has slowed “more than expected” in China and other emerging economies.

The statement mentioned that Canada, on the other hand, has a more modestly optimistic situation that singles out the mounting price of commodities produced here, including oil, in recent months. Whereas the global economy has controlled Canadian economic activity, the Bank however foresees a “moderate expansion.”

Bank of Canada’s statement mentioned that “following the recent period of below-potential growth, the economy is expected to pick up and return to full capacity by the end of 2013.” It also listed that “after taking into account revisions to the National Accounts, the Bank projects that the economy will grow by 2.2 per cent in 2012, 2.3 per cent in 2013 and 2.4 per cent in 2014.”

This is almost the same revision of the Bank’s projection in July statement, when it predicted the Canadian economy to grow by 2.1 per cent this year, 2.3 per cent next year and 2.5 per cent in 2014. The statement mentioned that “over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 per cent inflation target.” It said “the timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of imbalances in the household sector.”

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