The Bank of Canada announced this morning, September 10, 2009, that it is maintaining the overnight rate target at 1/4 per cent and says it is intent on keeping the promise to keep the main interest rate at this level until June 2010.
The Bank also announced that:
- Global economic and financial developments have been broadly in line with the Bank’s expectations
- Following a deep, synchronous recession, recent indicators point to the start of recovery in major economies, supported by aggressive policy stimulus and the stabilization of global financial markets
- In Canada, economic growth, the output gap, and inflation in the first half of 2009 have evolved largely as expected in the Bank’s July Monetary Policy Report (MPR)
- GDP growth in the second half of 2009 could be stronger than the Bank projected in July
- Total CPI inflation is still expected to trough in the current quarter before returning to the 2 per cent target in the second quarter of 2011 as aggregate supply and demand return to balance
- Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target
- Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target. In its conduct of monetary policy at low interest rates, the Bank retains considerable flexibility, consistent with the framework outlined in the April MPR
The fact that the Bank believes that GDP growth in the 2nd half of next year could be stronger than earlier thought while inflation remains under control is great news for us, and helps the notion that perhaps the worst of the economic news is behind us. Let’s hope so.