Canadian central bank keeps interest rate unchanged

September 6th, 2012 - 1:14 pm ICT by IANS  

Ottawa, Sep 6 (IANS) The Bank of Canada has left its benchmark interest rate unchanged at 1 percent, but hinted an increase could come next year when growth of the Canadian economy is expected to pick up.

“To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate,” said the central bank in a statement Wednesday, repeating a message it has delivered since April.

The trendsetting rate has been locked at 1 percent since September 2010 — a period of no change not seen since the mid-1950s, reported Xinhua.

Despite global headwinds restraining economic activity, Canada’s underlying momentum “remains at a pace roughly in line with the economy’s production potential”, or the pace at which the country’ s economy can expand without fuelling inflation, according to the Canadian central bank.

The downside risks to the global economy support the bank maintaining its 1-percent interest rate, according to Dawn Desjardins, assistant chief economist at the Royal Bank of Canada.

“Until there is clear evidence that policymakers outside of Canada have put in place programmes that are sufficient to reverse these risks, Canadian interest rates will remain low to counter the negative fallout on the domestic economy.”

The Bank of Canada plans to next announce its overnight rate target Oct 23, and release an outlook for the economy and inflation the following day as part of its quarterly Monetary Policy Report.

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