Canada: Bank of Canada keeps policy rate unchanged, lowers growth forecasts
October 23, 2013
At its 23 October monetary policy meeting, the Bank of Canada (BoC) left the target for the overnight rate unchanged at 1.00%, a decision that was in line with market expectations. Monetary authorities have left rates unchanged since September 2010.
According to the Central Bank, economic uncertainty at the domestic and global levels is, "delaying the pick-up in exports and business investment, leaving the level of economic activity lower than had been expected." In fact, the Bank revised down its growth predictions from 1.8% to 1.6% for 2013, and from 2.7% to 2.3% for 2014.The Bank expects the economy to return to full capacity by the end of 2015.
In terms of price developments, the BoC emphasized that inflation, "has remained low in recent months, reflecting the significant slack in the economy." The Bank expects that CPI will return to the target of 2% plus/minus 1.0 percentage points towards the end of 2015. The Bank concluded by reiterating previous statements that, "the considerable monetary policy stimulus currently in place remains appropriate." However, this time there was no mention of potential rate normalization, suggesting that plans for a rate hike in the near future have been put on hold.
FocusEconomics Consensus Forecast panelists see the policy rate at 1.01% at the end of 2013. For 2014, panelists expect the policy rate to rise to 1.33%.
Author: Carl Kelly, Economist