The Bank of Canada kept its key policy rate at One per cent on December 4th 2012. It has been unchanged at this level for over two years, marking the longest period way back to the early 1950s that rates have been left untouched. This includes the bottom line that the Bank would still like its next move to be a rate hike, saying some modest withdrawal of current impulse will "likely" be required "over time", but that the "timing and degree of any such withdrawal will be weighed carefully against global and domestic developments, including the evolution of disparities in the household sector." . And while Europe remains in recession, Chinese growth appears to be stabilizing, lessening fears of a hard landing.
The Bank declared that while the business growth in the united states was still progressing at a steady pace, it was being held back by uncertainty related to the result of fiscal cliff negotiations. Having said that, the world economy remains vulnerable to a major shock from the U.S. Or Europe.
Third quarter industrial expansion in Canada was weak, though the Bank attributed this to "transitory interruptions in the energy sector," announcing it still expects expansion to pick up going forward.
Spurred on by the continuance of near-record low interest rates, consumption and business investment still are anticipated to be the number one drivers of commercial growth in Canada next year. The Bank noted that housing activity has declined and that growth in household credit has slowed, but cautioned it was too early to determine if this trend would be sustained.
Regarding customer price inflation, the Bank stated that it has evolved broadly in accordance with their outlook, with both total and core inflation anticipated to rise and return to the Two per cent target in the subsequent year.
The final analysis is that commercial expansion is anticipated to stay modest but positive, consistent with low inflation and low interest rates. The Bank of Canada has regularly said it would like to raise rates, although the existing economic outlook advises such an action won't be warranted till late next year at the earliest, and that outlook could be revised by the time the Bank makes it next statement on Jan 23rd, 2013, by which time the result of the U.S. Financial cliff will be known.
As of December 4th, 2012 the advertised five-year lending rate stood at 5.24 percent. It has been unvaried at this level since the beginning of June.
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