Canada holds rate, growth, inflation evolve as forecast
Canada’s central bank left its benchmark target for the overnight rate steady at 0.50 percent, as expected, restating its view from October that the risks surrounding the outlook for inflation were roughly balanced and risks to financial stability from rising household debt were as expected.
The Bank of Canada (BOC), which cut its rate in January and July by a total of 50 basis points, also said economic growth was evolving broadly in line with its forecast from October with Gross Domestic Product expected to moderate in the fourth quarter of this year before moving to a rate that exceeds potential output in 2016.
In its October policy report, the BOC forecast growth this year of just over 1 percent before rising to about 2 percent next year and 2.5 percent in 2017 as the economy adjusts to lower commodity prices, the fall in the Canadian dollar, the U.S. recovery and easy monetary policy.
Canada’s GDP rose by 0.6 percent in the third quarter from the second quarter for annual growth of 1.2 percent, up from 1.1 percent.
Inflation is also in line with the BOC’s expectations as consumer price inflation remains near the bottom of the central bank’s target range of 1.0 percent due to the fall in energy prices while core inflation is close to 2 percent as the impact of the lower Canadian dollar and the output gap offset each other.
Headline inflation was steady at 1.0 percent in October and September while core inflation has been steady at 2.1 percent in the last three months.
The Canadian dollar has been depreciating against the U.S. dollar since 2013 and was trading at 1.34 to the dollar today, down 13.4 percent this year alone and about 20 percent since the start of 2014.
The Bank of Canada issued the following statement:
Source: http://www.centralbanknews.info/2015/12/canada-holds-rate-growth-inflation.html
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