The Bank of Canada left its main interest rate unchanged today, cut its growth outlook for the Canadian economy and removed a reference to withdrawing stimulus as the global economy slows.
The country’s economy will grow more slowly than projected, and take longer to return to its capacity level, as a debt crisis triggers a “brief” European recession and slow U.S. growth hurts consumer and business confidence and reduces demand for exports, the Ottawa-based central bank said in a statement. Inflation will also be slower than earlier forecast, falling to as low as 1 percent next year, it said.
“The outlook for the Canadian economy has weakened since July, with the significantly less favorable external environment affecting Canada through financial, confidence and trade channels,” the bank’s governing council, led Governor Mark Carney, 46, said today. “Economic momentum has slowed and is expected to remain modest through the middle of next year.”
Carney kept the Ottawa-based central bank’s target for overnight loans between commercial banks at 1 percent, extending its yearlong freeze on borrowing costs, as forecast by all 27 economists surveyed by Bloomberg.
The bank reduced its forecast for growth this year to 2.1 percent from a 2.8 percent estimate in July. Growth next year will be 1.9 percent, down from a 2.6 percent estimate, the bank forecast. It raised its growth projection for 2013 to 2.9 percent from 2.1 percent.
The economy won’t return to full capacity until the end of 2013, the central bank said, 18 months longer than it had forecast in July.
