Overnight rate holds steady, “conditionally”

As expected, the Bank of Canada announced that it will be maintaining the overnight rate of a quarter per cent, with a continued “conditional commitment” to maintain that until the second quarter of 2010. In its official press release it stated that “recent indicators point to the start of a global recovery from a deep, synchronous recession ….  This resumption of growth is supported by monetary and fiscal stimulus, increased household wealth, improving financial conditions, higher commodity prices, and stronger business and consumer confidence.”  The Bank then went on to use language that it would seem still give it room to manoeuvre before the second quarter of 2010 if need be.

It said: “However, heightened volatility and persistent strength in the Canadian dollar are working to slow growth and subdue inflation pressures.  The current strength in the dollar is expected, over time, to more than fully offset the favourable developments since July.” Growth, it said, is also projected to be “slightly higher” than previously forecasted in the second half of this year, but lower overall. 

“The Canadian economy is projected to grow by 3.0 per cent in 2010 and 3.3 per cent in 2011, after contracting by 2.4 per cent this year.  This is a somewhat more modest recovery in Canada than the average of previous economic cycles,” it said.  A full outlook for the economy and inflation will be made available Thursday, 22 October, while the next scheduled date for announcing the overnight rate target is 8 December 2009.

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