Canada’s central bank held its key overnight rate steady at the 1.00% level for the 11th consecutive time, and said there is less slack in an economy that’s now expected to return to full capacity by the third quarter of 2013, three months sooner than forecast previously.
The profile for inflation is “marginally” firmer and the core and total consumer price index will moderate this year and reach the 2% target by the third quarter of next year, also three months sooner than expected in October, the Bank of Canada said Tuesday.
“With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada,” the Bank said in its first rate decision of the year, repeating what it’s said in the last two statements. It characterized risks to the inflation forecast as “roughly balanced.”
The decision was unanimously predicted. The Bank said the outlook for the global economy has deteriorated amid an intensified euro-zone debt crisis, tighter conditions in financial markets and increased risk aversion. But it gave no sign of contemplating rate cuts. Rather, it acknowledged that the economy had more momentum in the second half of last year and upgraded growth forecasts for 2011 and 2012 to 2.4% and 2% respectively from 2.1% and 1.9%.
The CAD extended overnight gains after the rate decision was published, with the USD weakening to C$1.0129 from C$1.0137 before the release.
EasyForexNews Research Team