The Central Bank of Canada decided today to leave its benchmark interest rates unchanged at 0.25% inline with median estimates and the BOC signaled that it expects interest rates to remain unchanged through June 2010, as although the BOC sees that risks to growth are roughly balanced, however, the BOC wouldn’t want to threat the ongoing recovery.
The BOC expects that the current monetary policy in addition to the improvement in financial conditions as well as commodities to be able to promote economic growth, however, the BOC expects the economy to fulfill its long term growth potentials in the third quarter of 2011.
Meanwhile, the BOC expects inflation to be back to target in the third quarter of 2011, whereas the BOC expects inflation to rise by 2% in the second quarter of 2011, moreover, the BOC cut its growth forecast for 2011 to 3.3% from the prior projection of 3.5%, and the BOC also signaled that the Canadian economy is projected to grow by 3% in 2010.
Moreover, the BOC expects the Canadian economy to shrink by 2.4% this year compared with the prior estimate of -2.3%, meanwhile, the Bank of Canada believes that a high Canadian dollar will probably offset growth factors including higher commodity prices, while the BOC signaled that risks to inflation are tilted slightly downward.
The Bank of Canada clearly sees that the economy will continue to recover over the course of this year as well as next year, before the economy can return back to its growth potentials in 2011, but until then we should expect the recovery to continue, though it seems that the recovery will be a gradual one, but still there’s light at the end of the tunnel…
