Tags: Canada Leaves Rate Unchanged | Cuts Growth Forecast

Canada Leaves Rate Unchanged, Cuts Growth Forecast

Tuesday, 19 Oct 2010 09:33 AM

The Bank of Canada kept its benchmark interest rate unchanged at 1 percent as expected on Tuesday, and cut growth forecasts for 2010 and 2011 on a slower than expected global economic recovery.

"At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered," it said in a statement.

The bank used similar language when it raised the benchmark rate in September, its third consecutive rate rise.

"I'd say the first impression is it's a dovish statement and it certainly looks like the Bank of Canada is going to be on hold for a little while," said Steve Butler, director of foreign exchange trading at Scotia Capital.

The Canadian dollar weakened to around C$1.0360 to the U.S. dollar, or 96.52 cents, compared to Monday's close of C$1.0141 to the U.S. dollar, or 98.61 U.S. cents.

The Bank cut its 2010 growth forecast to 3.0 percent from 3.5 percent in July and its 2011 forecast to 2.3 percent from 2.9 percent. It hiked its prediction for 2012 growth to 2.6 percent from 2.2 percent in July.

The bank said a "combination of difficult labor market dynamics and ongoing deleveraging in many advanced economies" was expected to slow growth and contribute to a weaker-than-projected recovery in the United States, Canada's main export market.

"Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery," it added.

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The Bank of Canada kept its benchmark interest rate unchanged at 1 percent as expected on Tuesday, and cut growth forecasts for 2010 and 2011 on a slower than expected global economic recovery. At this time of transition in the global recovery, with a weaker U.S. outlook,...
Canada Leaves Rate Unchanged,Cuts Growth Forecast
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