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article imageBank of Canada holds key rate at 1% due to deepened euro crisis

By Andrew Moran     Dec 6, 2011 in Business
Ottawa - The Ottawa-based Bank of Canada announced Tuesday that it is holding the overnight rate at one percent. The central bank explained that it is responding accordingly to the deepening euro sovereign debt crisis.
In a press release, the Bank of Canada said since it last released its Monetary Policy Report (MPR) in October, the global economic outlook has remained uncertain and bleak. The international financial markets have been on the decline due to the sovereign debt crisis that has plagued Europe.
Furthermore, the central bank called for more action to be taken in Europe and that the recession overseas is far direr than what was originally projected in autumn.
The Bank of Canada did note, though, there has been growth in the United States economy due in part to business investment and consumer spending. However, “household deleveraging, fiscal consolidation and negative spillover effects from the European crisis are all expected to weight on U.S. growth.”
Bank of Canada Governor Mark Carney
Bank of Canada Governor Mark Carney
World Economic Forum
Echoing data that suggests growth continues in emerging markets, such as China, the Bank of Canada warned that it is “moderating” because of less external demand and insulated policies from the past.
“Going forward, the weaker external outlook is expected to dampen GDP growth in Canada through financial, confidence and trade channels,” wrote the Bank of Canada. “The economy also continues to face competitiveness challenges, including the persistent strength of the Canadian dollar.”
The Consumer Price Index inflation has increased, but the Bank of Canada assured that they expect the rate to diminish because of “reduced pressures from food and energy prices and ongoing excess supply in the economy.”
In the end, the Canadian central bank will attempt to make its monetary policy steady with the two percent inflation target over the course of the medium-term.
On Jan. 17, 2012, the Bank of Canada will announce its overnight rate target. The following day will see the Bank’s outlook on the economy and inflation.
More about Bank of Canada, Mark Carney, euro crisis, Ottawa, canada central bank
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