OTTAWA - The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of a percentage point to 2 1/4 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 1/2 per cent.
Three major interrelated developments are having a profound impact on the Canadian economy. First, the intensification of the global financial crisis has led to severe strains in financial markets. The associated need for the global banking sector to continue to reduce leverage will restrain growth for some time. Second, the global economy appears to be heading into a mild recession, led by a U.S. economy already in recession. Third, there have been sharp declines in many commodity prices. The outlook for growth and inflation in Canada is now more uncertain than usual.
Consistent with the G7 Plan of Action, major economies have announced extraordinary measures to stabilize their financial systems. These initiatives will be pivotal to resuming the flow of credit to support global economic growth. Canada's economy and strong financial system will benefit directly from these actions.
The weaker outlook for global demand will increase the drag on the Canadian economy coming from exports. Lower commodity prices will also dampen the outlook, working through a deterioration in Canada's terms of trade to moderate domestic demand growth. The marked tightening in Canadian credit conditions in recent weeks will restrain business and housing investment. The Bank expects growth to be sluggish through the first quarter of next year, then to pick up over the rest of 2009 and to accelerate to above-potential growth in 2010 supported by improving credit conditions, the lagged effects of monetary policy actions and stronger global growth. The recent sizeable depreciation of the Canadian dollar will also provide an important offset to the effects of weaker global demand and lower commodity prices. Overall, the Bank projects average annual growth in real GDP of 0.6 per cent in both 2008 and 2009, and 3.4 per cent in 2010.
With excess supply projected to build throughout 2009 and lower assumed energy prices, inflationary pressures will ease significantly relative to the projection in the July Monetary Policy Report Update. Core inflation is now projected to remain below 2 per cent until the end of 2010. Total CPI inflation should peak during the third quarter of 2008, fall below 1 per cent in the middle of 2009, and then return to the 2 per cent target by the end of 2010.
In the face of diminished inflationary pressures, the Bank of Canada lowered its policy interest rate by 50 basis points on 8 October, acting in concert with other major central banks. This extraordinary move, combined with today's announcement, brings the cumulative reduction in our target for the overnight rate to 75 basis points since the Bank's last fixed announcement date. These actions provide timely and significant support to the Canadian economy. The cumulative reduction in the Bank's policy rate since last December is now 225 basis points.
In line with the new outlook, some further monetary stimulus will likely be required to achieve the 2 per cent inflation target over the medium term. The evolution of the financial crisis, its impact on the global economy and the timing of the effects of the various extraordinary measures being taken to address it pose significant risks to the projection on both the upside and the downside.
The Bank will publish the details of its new projection for the economy and inflation, including all the key risks to the projection, in the Monetary Policy Report on 23 October 2008.
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 9 December 2008.
Tuesday, October 21, 2008
Wednesday, October 8, 2008
Bank of Canada lowers overnight rate target by 1/2
Central Banks Announce Coordinated Interest Rate Reductions
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Bank of Canada lowers overnight rate target by 1/2 percentage point to 2 1/2 per cent
The Bank of Canada today announced that it is lowering its target for the overnight rate by 1/2 percentage point to 2 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 3/4 per cent.
The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly.
As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions. Weaker growth in the United States and other important trading partners will increase the drag on the Canadian economy coming from net exports. The deterioration of our terms of trade will act to moderate the growth of domestic demand. While the recent depreciation of the Canadian dollar will help cushion the effects of the weaker global outlook on the domestic economy, it will not completely offset them.
Below-potential growth in aggregate demand through 2009, combined with a lower profile for commodity prices, will significantly ease inflation pressures in Canada. Inflation expectations remain well anchored.
In view of these developments, the Bank of Canada decided to join other major central banks and lower its target for the overnight rate by 50 basis points today. This action will provide timely and significant support to the Canadian economy. The Bank will continue to monitor carefully economic and financial developments, along with the evolution of risks, in judging whether any further action might be required to achieve its 2 per cent inflation target over the medium term.
Information note:The Bank of Canada's next scheduled date for announcing the overnight rate target is 21 October 2008. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 23 October 2008.
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Bank of Canada lowers overnight rate target by 1/2 percentage point to 2 1/2 per cent
The Bank of Canada today announced that it is lowering its target for the overnight rate by 1/2 percentage point to 2 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 2 3/4 per cent.
The intensification of the global financial crisis is having a marked impact on all countries. In recent weeks conditions in global financial markets have deteriorated sharply, the U.S. economy has weakened further, and commodity prices have fallen abruptly.
As a result of these developments, credit conditions in Canada have tightened significantly, despite the relative health of our financial institutions. Weaker growth in the United States and other important trading partners will increase the drag on the Canadian economy coming from net exports. The deterioration of our terms of trade will act to moderate the growth of domestic demand. While the recent depreciation of the Canadian dollar will help cushion the effects of the weaker global outlook on the domestic economy, it will not completely offset them.
Below-potential growth in aggregate demand through 2009, combined with a lower profile for commodity prices, will significantly ease inflation pressures in Canada. Inflation expectations remain well anchored.
In view of these developments, the Bank of Canada decided to join other major central banks and lower its target for the overnight rate by 50 basis points today. This action will provide timely and significant support to the Canadian economy. The Bank will continue to monitor carefully economic and financial developments, along with the evolution of risks, in judging whether any further action might be required to achieve its 2 per cent inflation target over the medium term.
Information note:The Bank of Canada's next scheduled date for announcing the overnight rate target is 21 October 2008. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 23 October 2008.
Wednesday, September 3, 2008
Bank of Canada keeps overnight rate target at 3 per cent
OTTAWA - The Bank of Canada today announced that it is maintaining its target for the overnight rate at 3 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 3 1/4 per cent.
The three global developments highlighted in the July Monetary Policy Report Update continue to have a major influence on the Canadian economy. Two of them - the course of the U.S. economy and the ongoing turbulence in global financial markets - have evolved broadly in line with the Bank's expectations. However, there is an increased risk of a more pronounced interplay between weakness in the U.S. economy and tightness in credit conditions that could affect the U.S. outlook for 2009.
With respect to the third highlighted development, the sharp increases in commodity prices, the risk identified in July that these prices could be weaker than assumed has materialized. This has been largely due to the impact of slower global growth on the demand for energy. Given tight inventories, commodity prices can be expected to remain volatile. The reduction in commodity prices has been a significant factor in the decline of the Canadian dollar against the U.S. dollar. The weaker global growth and the decline of the Canadian dollar will have opposing effects on the demand for Canadian goods and services.
In Canada, domestic demand has slowed modestly but remains strong. It continues to be supported by financial conditions that remain significantly better than those in most other major economies and by income gains stemming from past improvements in the terms of trade. Overall, the level of economic activity is slightly lower than expected in July but still close to the economy's production capacity.
Global inflationary pressures remain elevated, with potential implications for import prices and the dynamics of inflation in Canada. While total CPI inflation has moved above 3 per cent, core inflation has stayed at 1.5 per cent as expected. The temporary factors affecting both of these measures should dissipate over the coming quarters, and the Bank continues to expect that total and core inflation will converge on 2 per cent in the second half of 2009. However, the recent decline in both spot and futures prices for energy means that the spike in total CPI inflation expected between now and the first quarter of 2009 will be lower than projected in July.
Given these developments, the Bank judges that the current level of the target for the overnight rate remains appropriately accommodative. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 21 October 2008. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 23 October 2008.
The three global developments highlighted in the July Monetary Policy Report Update continue to have a major influence on the Canadian economy. Two of them - the course of the U.S. economy and the ongoing turbulence in global financial markets - have evolved broadly in line with the Bank's expectations. However, there is an increased risk of a more pronounced interplay between weakness in the U.S. economy and tightness in credit conditions that could affect the U.S. outlook for 2009.
With respect to the third highlighted development, the sharp increases in commodity prices, the risk identified in July that these prices could be weaker than assumed has materialized. This has been largely due to the impact of slower global growth on the demand for energy. Given tight inventories, commodity prices can be expected to remain volatile. The reduction in commodity prices has been a significant factor in the decline of the Canadian dollar against the U.S. dollar. The weaker global growth and the decline of the Canadian dollar will have opposing effects on the demand for Canadian goods and services.
In Canada, domestic demand has slowed modestly but remains strong. It continues to be supported by financial conditions that remain significantly better than those in most other major economies and by income gains stemming from past improvements in the terms of trade. Overall, the level of economic activity is slightly lower than expected in July but still close to the economy's production capacity.
Global inflationary pressures remain elevated, with potential implications for import prices and the dynamics of inflation in Canada. While total CPI inflation has moved above 3 per cent, core inflation has stayed at 1.5 per cent as expected. The temporary factors affecting both of these measures should dissipate over the coming quarters, and the Bank continues to expect that total and core inflation will converge on 2 per cent in the second half of 2009. However, the recent decline in both spot and futures prices for energy means that the spike in total CPI inflation expected between now and the first quarter of 2009 will be lower than projected in July.
Given these developments, the Bank judges that the current level of the target for the overnight rate remains appropriately accommodative. The Bank will continue to monitor carefully economic and financial developments in the Canadian and global economies, together with the evolution of risks, and set monetary policy consistent with achieving the 2 per cent inflation target over the medium term.
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 21 October 2008. A full update of the Bank's outlook for growth and inflation, including risks to the projection, will be set out in the Monetary Policy Report, to be published on 23 October 2008.
Wednesday, July 9, 2008
Government of Canada Moves to Protect, Strengthen Canadian Housing Market
The Government of Canada today announced adjustments to the rules for government guaranteed mortgages aimed at protecting and strengthening the Canadian housing market.
The new measures include:
>> Fixing the maximum amortization period for new government-backed mortgages to 35 years;
>> Requiring a minimum down payment of five per cent for new government-backed mortgages;
>> Establishing a consistent minimum credit score requirement; and
>> Introducing new loan documentation standards.
Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada.
The new limits are planned to take effect October 15, 2008. This would allow existing mortgage pre-approvals with the common 90-day duration to be used or expire. Certain exceptions would also be permitted after October 15. The Government will work closely with all stakeholders to ensure timely and effective implementation of these measures.
As these measures relate only to new, government-backed insured mortgages, Canadians who already hold mortgages will not be affected by this announcement.
The measures announced today will build on the strength of Canada’s housing market. According to the International Monetary Fund, the increase in house prices in Canada is based on sound economic factors such as low interest rates, rising incomes and a growing population. A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home.
Mortgage arrears—overdue mortgage payments—have also remained low. In recent years, the percentage of mortgages in arrears for three months or more continues to be at low levels not seen since 1990.
The new measures include:
>> Fixing the maximum amortization period for new government-backed mortgages to 35 years;
>> Requiring a minimum down payment of five per cent for new government-backed mortgages;
>> Establishing a consistent minimum credit score requirement; and
>> Introducing new loan documentation standards.
Today’s announcement marks a responsible and measured approach by the Government to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada.
The new limits are planned to take effect October 15, 2008. This would allow existing mortgage pre-approvals with the common 90-day duration to be used or expire. Certain exceptions would also be permitted after October 15. The Government will work closely with all stakeholders to ensure timely and effective implementation of these measures.
As these measures relate only to new, government-backed insured mortgages, Canadians who already hold mortgages will not be affected by this announcement.
The measures announced today will build on the strength of Canada’s housing market. According to the International Monetary Fund, the increase in house prices in Canada is based on sound economic factors such as low interest rates, rising incomes and a growing population. A recent Statistics Canada report concluded that home ownership is at record levels, with over two-thirds of Canadians owning their own home.
Mortgage arrears—overdue mortgage payments—have also remained low. In recent years, the percentage of mortgages in arrears for three months or more continues to be at low levels not seen since 1990.
Tuesday, June 10, 2008
Bank of Canada keeps overnight rate target at 3 per cent
OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 3 per cent. The operating band for the overnight rate is unchanged, and the Bank Rate remains at 3 1/4 per cent.
Since the April Monetary Policy Report (MPR), economic developments have been broadly in line with expectations. However, the balance of risks to the Bank's April projection for inflation in Canada has shifted slightly to the upside. Although the composition of U.S. growth has not been favourable for demand for Canadian goods and services, overall, global growth has been stronger and commodity prices have been sharply higher than expected. At the same time, many of the downside risks to inflation identified in the April MPR have eased, while the evolution of credit conditions has been in line with expectations. The risk remains that potential growth will be weaker than assumed.
With the decline in first-quarter GDP, the Canadian economy is judged to have moved into excess supply, which is expected to increase this year. Consistent with the April MPR, the Bank continues to project that economic growth will pick up this year and accelerate in 2009, owing in part to a firming of U.S. demand and accommodative monetary policy in Canada.
If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year. However, with the Canadian economy operating in excess supply, core inflation is expected to remain below 2 per cent through 2009. Both total and core inflation should converge on 2 per cent in 2010 as the economy returns to balance.
Against this backdrop, the Bank now judges that the current stance of monetary policy is appropriately accommodative to bring aggregate demand and supply into balance and to achieve the 2 per cent inflation target. There continue to be important downside and upside risks to inflation in Canada, which the Bank will monitor closely.
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 15 July 2008. The Bank will publish an updated projection for the economy and inflation, and its assessment of the risks, in the Monetary Policy Report Update on 17 July 2008.
Since the April Monetary Policy Report (MPR), economic developments have been broadly in line with expectations. However, the balance of risks to the Bank's April projection for inflation in Canada has shifted slightly to the upside. Although the composition of U.S. growth has not been favourable for demand for Canadian goods and services, overall, global growth has been stronger and commodity prices have been sharply higher than expected. At the same time, many of the downside risks to inflation identified in the April MPR have eased, while the evolution of credit conditions has been in line with expectations. The risk remains that potential growth will be weaker than assumed.
With the decline in first-quarter GDP, the Canadian economy is judged to have moved into excess supply, which is expected to increase this year. Consistent with the April MPR, the Bank continues to project that economic growth will pick up this year and accelerate in 2009, owing in part to a firming of U.S. demand and accommodative monetary policy in Canada.
If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year. However, with the Canadian economy operating in excess supply, core inflation is expected to remain below 2 per cent through 2009. Both total and core inflation should converge on 2 per cent in 2010 as the economy returns to balance.
Against this backdrop, the Bank now judges that the current stance of monetary policy is appropriately accommodative to bring aggregate demand and supply into balance and to achieve the 2 per cent inflation target. There continue to be important downside and upside risks to inflation in Canada, which the Bank will monitor closely.
Information note:
The Bank of Canada's next scheduled date for announcing the overnight rate target is 15 July 2008. The Bank will publish an updated projection for the economy and inflation, and its assessment of the risks, in the Monetary Policy Report Update on 17 July 2008.
Wednesday, June 4, 2008
Land Transfer Tax Refund to First Time Buyers of Resale Homes
Refund on Resale Homes, it's Now the Law.
In the 2007 Ontario Economic Outlook and Fiscal Review, the government proposed to expand the Land Transfer Tax Refund Program to include first-time homebuyers of resale homes for agreements of purchase and sale entered into after December 13, 2007.
This measure was included in Bill 44, Budget Measures and Interim Appropriation Act, 2008, and, having received Royal Assent on May 14, 2008, is now law. As a result of this change, first-time homebuyers of resale homes may now be able to receive a refund from the provincial government of up to $2,000 of the land transfer tax paid.
Details from the original announcement December 2007
First-time buyers of resale homes to benefit from new tax measure
The McGuinty government is giving all first-time homebuyers a break on land transfer tax by proposing to expand the Land Transfer Tax Refund Program to include purchases of resale homes, Finance Minister Dwight Duncan announced today.
“Expanding this Land Transfer Tax refund is an important part of our government’s commitment to helping Ontarians buying their first home,” Duncan said.
Effective December 14th , first-time buyers of resale homes, as well as newly constructed homes, would be eligible for a refund from the provincial government of up to $2,000 of the Land Transfer Tax paid.
The expanded Land Transfer Tax Refund Program for First-time Homebuyers is part of a package of new tax initiatives announced in the 2007 Fall Economic Outlook and Fiscal Review that would provide $1.4 billion in provincial tax relief for business and people over three years. The government is making strategic investments in people, communities and infrastructure to strengthen Ontario’s economic advantage and help manufacturers and other sectors challenged by current economic conditions.
For copies of the Refund Forms and or a Land Transfer Tax Calculator visit: www.OntarioMortgageTeam.com
In the 2007 Ontario Economic Outlook and Fiscal Review, the government proposed to expand the Land Transfer Tax Refund Program to include first-time homebuyers of resale homes for agreements of purchase and sale entered into after December 13, 2007.
This measure was included in Bill 44, Budget Measures and Interim Appropriation Act, 2008, and, having received Royal Assent on May 14, 2008, is now law. As a result of this change, first-time homebuyers of resale homes may now be able to receive a refund from the provincial government of up to $2,000 of the land transfer tax paid.
Details from the original announcement December 2007
First-time buyers of resale homes to benefit from new tax measure
The McGuinty government is giving all first-time homebuyers a break on land transfer tax by proposing to expand the Land Transfer Tax Refund Program to include purchases of resale homes, Finance Minister Dwight Duncan announced today.
“Expanding this Land Transfer Tax refund is an important part of our government’s commitment to helping Ontarians buying their first home,” Duncan said.
Effective December 14th , first-time buyers of resale homes, as well as newly constructed homes, would be eligible for a refund from the provincial government of up to $2,000 of the Land Transfer Tax paid.
The expanded Land Transfer Tax Refund Program for First-time Homebuyers is part of a package of new tax initiatives announced in the 2007 Fall Economic Outlook and Fiscal Review that would provide $1.4 billion in provincial tax relief for business and people over three years. The government is making strategic investments in people, communities and infrastructure to strengthen Ontario’s economic advantage and help manufacturers and other sectors challenged by current economic conditions.
For copies of the Refund Forms and or a Land Transfer Tax Calculator visit: www.OntarioMortgageTeam.com
Tuesday, April 22, 2008
Bank of Canada lowers overnight rate target by 1/2 percentage point to 3 per cent
OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by one-half of a percentage point to 3 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 3 1/4 per cent.
Growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity.
The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy. This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008. In addition, tightening credit conditions and softening sentiment are expected to moderate business investment and consumer spending. Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy.
The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010. Consistent with this growth profile, the economy moves into excess supply in the second quarter of 2008, and spare capacity continues to increase through early next year. However, a gradual recovery in the U.S. economy, a return to more normal credit conditions, and accommodative monetary policy should generate above-potential growth and bring the economy back into balance around mid-2010.
The recent price-level adjustments for automobiles and the effect of past changes in indirect taxes will keep measured inflation below target through 2008. The emergence of excess supply in the economy should keep downward pressure on inflation through 2009. Both core and total inflation are projected to move up to 2 per cent in 2010, as the economy moves back into balance. There are both upside and downside risks to the Bank's new projection for inflation; these risks appear to be balanced.
In line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada.
A full analysis of economic and financial developments, trends, and risks will be set out in the Bank's Monetary Policy Report, to be published on 24 April 2008.
Information note:
The Bank's next scheduled date for announcing the overnight rate target is 10 June 2008.
Growth in the global economy has weakened, reflecting the effects of a sharp slowdown in the U.S. economy and ongoing dislocations in global financial markets. Growth in the Canadian economy has also moderated as buoyant growth in domestic demand, supported by high employment levels and improved terms of trade, has been substantially offset by the fall in net exports. While both total and core CPI inflation were running at about 1.5 per cent at the end of the first quarter, the underlying trend of inflation is judged to be about 2 per cent, consistent with an economy that was operating just above its production capacity.
The Bank is now projecting a deeper and more protracted slowdown in the U.S. economy. This has direct consequences for the Canadian economic outlook, with declining exports projected to exert a significant drag on growth in 2008. In addition, tightening credit conditions and softening sentiment are expected to moderate business investment and consumer spending. Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of cumulative easing in monetary policy.
The Bank projects that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010. Consistent with this growth profile, the economy moves into excess supply in the second quarter of 2008, and spare capacity continues to increase through early next year. However, a gradual recovery in the U.S. economy, a return to more normal credit conditions, and accommodative monetary policy should generate above-potential growth and bring the economy back into balance around mid-2010.
The recent price-level adjustments for automobiles and the effect of past changes in indirect taxes will keep measured inflation below target through 2008. The emergence of excess supply in the economy should keep downward pressure on inflation through 2009. Both core and total inflation are projected to move up to 2 per cent in 2010, as the economy moves back into balance. There are both upside and downside risks to the Bank's new projection for inflation; these risks appear to be balanced.
In line with this outlook, some further monetary stimulus will likely be required to achieve the inflation target over the medium term. Given the cumulative reduction in the target for the overnight rate of 150 basis points since December, the timing of any further monetary stimulus will depend on the evolution of the global economy and domestic demand, and their impact on inflation in Canada.
A full analysis of economic and financial developments, trends, and risks will be set out in the Bank's Monetary Policy Report, to be published on 24 April 2008.
Information note:
The Bank's next scheduled date for announcing the overnight rate target is 10 June 2008.
Subscribe to:
Posts (Atom)
