Bank of Canada Maintains Overnight Rate Target At 1 Per Cent

Bank of Canada Maintains Overnight Rate Target At 1 Per Cent

Sometimes it feels good to be surprised, but Tuesday’s anticipated announcement by the Bank of Canada that it is maintaining its target for the overnight rate at 1 percent was a relief.  The global economic recovery is entering a new phase, and the Bank of Canada is now expecting weaker-than-projected recovery across the board, especially in the United States.  Canada is not an exception in this shift in projections since July’s Monetary Policy Report, as the Bank continues to expect the economic recovery here will also be more gradual. Corresponding to the overnight right maintaining at 1 percent, the Bank Rate is set at 1 ¼ percent and the deposit rate is set at ¾ percent.  Growth rates in Canada are expected to be 3.0 percent in 2010, 2.3 percent in 2011, and 2.6 percent in 2012.  Although a portion of this more subdued profile is a result of the more gradual global recovery, it also takes into account a more subdued expectation for Canadian household spending.  The projections around household spending come from the decline in housing activity, and as a result, the increased focus on household debt considerations.