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The Bank of Canada announced that is was holding rates steady at 1.0% after its monetary policy meeting Wednesday. Though expected there had been concerns of hawkish language after last week's strong jobs report in Canada. The Canadian dollar fell in relief after the report.

Canada Fall

Bank of Canada interest rate decision and statement on Dec 6, 2017:

Highlights

  • Will 'continue to be cautious' on rate move and will be guided by incoming data
  • Recent Canadian data in line with October outlook; employment growth has been 'very strong' wages have shown some improvement
  • Higher rates will likely be needed over time
  • Global outlook subject to 'considerable' uncertainty, including geopolitical developments and trade policies
  • Q3 growth was stronger than forecast but is expected to moderate
  • Revised higher level of prior output unlikely to have significant implications for output gap because they imply a higher level of potential growth
  • Housing has continued to moderate, as expected
  • Core inflation has edged up in recent months, reflecting continued absorption of economic slack
  • Exports were softer than forecast in Q3 but latest trade data support expectation growth will resume
  • Some indicators show continued labour market slack

Full Text

Bank of Canada maintains overnight rate target at 1 per cent

The Bank of Canada today maintained 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 per cent.

The global economy is evolving largely as expected in the Bank's October Monetary Policy Report (MPR). In the United States, growth in the third quarter was stronger than forecast but is still expected to moderate in the months ahead. Growth has firmed in other advanced economies. Meanwhile, oil prices have moved higher and financial conditions have eased. The global outlook remains subject to considerable uncertainty, notably about geopolitical developments and trade policies.

Recent Canadian data are in line with October's outlook, which was for growth to moderate while remaining above potential in the second half of 2017. Employment growth has been very strong and wages have shown some improvement, supporting robust consumer spending in the third quarter. Business investment continued to contribute to growth after a strong first half, and public infrastructure spending is becoming more evident in the data. Following exceptionally strong growth earlier in 2017, exports declined by more than was expected in the third quarter. However,  the latest trade data support the MPR projection that export growth will resume as foreign demand strengthens. Housing has continued to moderate, as expected.

Inflation has been slightly higher than anticipated and will continue to be boosted in the short term by temporary factors, particularly gasoline prices. Measures of core inflation have edged up in recent months, reflecting the continued absorption of economic slack. Revisions to past quarterly national accounts have resulted in a higher level of GDP. However, this is unlikely to have significant implications for the output gap because the revisions also imply a higher level of potential output. Meanwhile, despite rising employment and participation rates, other indicators point to ongoing­ - albeit diminishing - slack in the labour market.

Based on the outlook for inflation and the evolution of the risks and uncertainties identified in October's MPR, Governing Council judges that the current stance of monetary policy remains appropriate. While higher interest rates will likely be required over time, Governing Council will continue to be cautious, guided by incoming data in assessing the economy's sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.

Source: Bank of Canada 

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