Wednesday, October 30, 2013

Peter Kinch - Thoughts on Bank of Canada policy

There has been a sea of change at the Bank of Canada. No longer are policymakers setting a specific monetary course. For the first time in more than a year, they have dropped any reference to interest rates eventually rising.

At the same time, they’re also taking a less-rosy outlook for the economic climate, in Canada and globally.

What hasn’t changed, however, is the central bank’s biggest policy lever – its benchmark lending rate, which has remained at a near-record-low of 1% since September 2010 and which has been locked in by lower-than-anticipated inflation and lagging growth.

Today, those policymakers – now under the leadership of Stephen Poloz, who replaced Mark Carney in June – again kept that rate as is. They also downgraded growth estimates for Canada, despite some positive economic signs coming out of Europe and Asia, tempered by ongoing uncertainty over budget crises in the US.

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