Interest Rate Announcement from the Bank of Canada

 October 25, 2011

As anticipated, the Bank of Canada opted to hold its target rate at 1% this morning.  Ongoing uncertainty in the European Markets continue to weigh heavily on the Bank's forecast.  The Bank od Canada is also expecting continued weakness, but no recession, in the United States through the first half of 2012 before a resumption of stronger growth. Given various challenges in the global economy, the Bank of Canada trimmed its outlook for Canadian economic growth to 2.1 per cent in 2011, 1.9 per cent in 2012 and 2.9 per cent in 2013 which is in line with our own forecast. On inflation, the Bank now expects slack in the economy to persist longer than originally forecast, leading to a closing of the output gap at the end of 2013. This implies softer than expected inflation in coming quarters, with consumer price growth moderating before returning to the Bank's 2 per cent target by the end of 2013.

Overall, this statement shows a very cautious Bank of Canada that is unlikely to make any significant movements on interest rates over the next year or so. Further monetary tightening will be highly contingent on a brighter growth outlook in the United States and a credible solution to the Euro sovereign debt crisis. Therefore we expect the Bank of Canada to remain on the sidelines through the end of 2011 and the first half of 2012

*Source: British Columbia Real Estate Assosiation

Dave Strle

Dave Strle

REALTORĀ®
CENTURY 21 Executives Realty Ltd.
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