The Bank of Canada kept its key policy rate at 1 per cent on December Fourth 2012. This includes the final analysis the Bank would still like its next move to be a rate increase, saying some modest withdrawal of current stimulus will “likely” be required “over time”, but the “timing and degree of any such withdrawal will be weighed conscientiously against world and domestic developments, including the development of disparities in the household sector.”
The Bank said that while the commercial expansion in the US was still progressing at a steady pace, it was being held back by doubt related to the outcome of economic cliff negotiations.
The text accompanying the announcement was unchanged from the prior 3 statements. And while Europe remains in recession, Chinese expansion appears to be stabilizing, lessening fears of a hard landing. That said, the global economy remains vulnerable to a major shock from the U.S. Or Europe.
Spurred on by the continuation of near-record low interest rates, consumption and business investment still are expected to be the number one drivers of economic growth in Canada next year.
Third quarter economic expansion in Canada was feeble, although the Bank traced this to “transitory disruptions in the energy sector,” claiming it still expects expansion to pick up going forward. The Bank noted that housing activity has declined and that growth in household credit has slowed, but cautioned that it was too early to tell if this trend would be sustained.
Per customer price inflation, the Bank asserted it has evolved broadly in accordance with their forecast, with both total and core inflation predicted to rise and return to the 2 percent target in the following year. The Bank of Canada has repeatedly said it would like to raise rates, though the existing economic outlook suggests such an action may not be warranted until late next year at the earliest, and that outlook could be revised by the point the Bank makes it next statement on January 23rd, 2013, by which time the outcome of the U.S.
The final analysis is that industrial growth is predicted to remain modest but positive, consistent with low inflation and low interest rates. Financial cliff will be known. It has been unchanged at this level since the start of June.