Canada: Bank of Canada leaves overnight rate unchanged in May
May 29, 2013
At its 29 May monetary policy meeting, the Bank of Canada (BoC) left the target for the overnight rate unchanged at 1.00% in a decision widely expected by the market. Monetary authorities have left rates unchanged since September 2010. This was the last interest rate decision by Governor Mark Carney, who will be succeeded by Stephen Poloz as of 3 June as he departs to take over as new governor of the Bank of England.
According to the Central Bank, global economic activity has been characterized by modest growth in the United States, recession in the Euro area as well as by a positive response of the Japanese economy to the massive policy stimulus implemented by the country's authorities. On the Canadian economy, the Bank said that it expects consumer spending and business investment to underpin growth going forward. Regarding household credit, the Bank expects the debt-to-income ratio to stabilize around its current levels.
Regarding price developments the BoC stated that inflation is "expected to remain subdued in coming quarters before gradually rising to 2 per cent by mid-2015", which is the mid-point of the Bank's target of 2.0% plus/minus 1.0 percentage points. Against this backdrop, the Bank maintained a slightly tightening bias, suggesting that "the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required".
FocusEconomics Consensus Forecast panellists see the policy rate at 1.03% by the end of 2013. For 2014, panellists expect the policy rate to rise to 1.57%.