The Bank of Canada adjusted its economic outlook and will maintaining its target for the overnight rate at 1 per cent.
The Bank expects the economic recovery to be more gradual than it had projected in its July Monetary Policy Report, with growth of 3.0 per cent in 2010, 2.3 per cent in 2011, and 2.6 per cent in 2012.
While the Bank expects that private demand in developed economies will become sufficiently entrenched to sustain the recovery, the combination of difficult labour market dynamics and ongoing deleveraging in many developed economies is expected to moderate the pace of growth relative to prior expectations.
This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending.
Overall, the composition of demand in Canada is expected to shift away from government and household expenditures towards business investment and net exports. The strength of net exports will be sensitive to currency movements, the expected recovery in productivity growth, and the prospects for external demand.
The Central Bank cautions 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.
The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.
Source: Bank of Canada