Bank of Canada Governor Mark Carney held his benchmark interest rate at 1 per cent Tuesday, pointing to global threats on both sides of the Atlantic and weaker-than-expected exports, while also signalling that the domestic economy�s strength is moving closer to higher rates.
In explaining the decision to leave borrowing costs alone for a seventh consecutive meeting, as expected, the central bank said that �widespread concerns� over sovereign debt problems have �increased risk aversion and volatility in financial markets.� However, Mr. Carney and his rate-setting panel said financial conditions in Canada �remain very stimulative� and the growth of private credit is strong despite global developments.
Moreover, in a teaser to a quarterly forecast they will release Wednesday, policy makers barely touched their growth projections for Canada from 2011 to 2013, and said their preferred gauge of inflation, which is approaching their 2 per cent target sooner than they had predicted, will hover around that level through 2013.
As a result, the central bank dropped a crucial word from the most important paragraph of its statement, indicating that its first rate hike since last September could come sooner than many economists and investors think.
- Article source: The globe and mail - July 19th