Duguay Repeats Plan to Hold Canada Rate Through June
By Alexandre Deslongchamps and Greg Quinn
Feb. 8 (Bloomberg) -- Bank of Canada Deputy Governor Pierre Duguay repeated a pledge to hold the central bank’s key policy rate at a record low 0.25 percent through June, saying there is lots of slack in the economy.
“The recovery will be difficult,” he said during a speech today in Quebec City, Quebec. “A good deal of the recovery is supported by expansionist budgetary and monetary policies and we are still waiting to see some momentum from the private sector.”
Governor Mark Carney kept the key lending rate unchanged last month and said only a shift in the inflation outlook would lead him to an earlier rate increase. Duguay reiterated the bank’s forecast for economic growth of 2.9 percent this year and 3.5 percent in 2011.
The economy “barely grew in the third quarter, but we expect faster growth starting in the fourth quarter,” Duguay said. The bank projected 3.3 percent growth for last quarter in its Jan. 21 Monetary Policy Report.
The economy has considerable excess supply and the recovery will be slowed by weak U.S. orders and a strong Canadian dollar that “continues to be a brake on growth,” Duguay said. He also said it will take until the third quarter of next year for inflation to accelerate to policy makers’ 2 percent target.
“The risks have diminished and we are more certain that we are in a recovery,” Duguay said. “We’re not out of the woods yet,” he added.
Canadian home resales and prices will grow to records this year, boosted by low interest rates, the Canadian Real Estate Association said today. Housing starts rose to a 15-month high in January, Canada Mortgage and Housing Corp. said today.
The Canadian currency traded for C$1.0714 per U.S. dollar at 1:45 p.m. in Toronto, little changed from Feb. 5. The currency has gained 14 percent against the U.S. dollar over the past 12 months.
Posted by Jodi Gibson
on February 9, 2010