Bank of Canada Announcement - Rates Remain Unchanged

Slow and steady wins the race was the message today from the Bank of Canada. As expected- stability was the order of the day in Tuesday’s interest rate announcement.  Rates will remain unchanged- which will keep the status quo in terms of monetary stimulus.

The overnight rate will maintain its’ position at 1%. The Bank Rate is correspondingly 1 1/4 % and the deposit rate is 3/4%.

This maintenance plan is attributed to global economic recovery carrying ahead at a healthier pace than had previously been forecast. In the U.S., domestic demand has increased- and it expected to increase more with new stimulus to be offered soon. In Europe, growth has outpaced forecasts as well- although the region is the source of uncertainty- from a global perspective. These markets have begun to introduce measures to rectify this, so there is hope for stability.

On the domestic front, the Canadian economic recovery is continuing on much as had been expected. There are concerns, that have been voiced recently by various government agencies, about the overextension of household consumer debt, but the thinking is that the combination of low interest rates coupled with newly introduced lending restrictions will create a favourable environment for continued modest growth.
The Bank of Canada predicts for 2011 growth at a rate of 2.4% and 2.8% in 2012- with an expectation to return to full economic capacity by the end of 2012.

Inflation has not been a major factor as of yet, with prices remaining subdued, likely because of “considerable slack in the Canadian Economy.” Inflation is forecasted to reach a manageable 2% by 2012.