The Bank of Canada (BOC) announced Tuesday it will maintain its overnight rate target at 1%.
The overnight rate target, also known as the policy interest rate, is the BOC’s main tool for driving monetary policy and it affects other interest rates in the country.
The BOC said Canada’s economic outlook has not changed significantly since October when it released its Monetary Policy Report (MPR). It said the rate of growth was higher than projected in 2011’s second half, but the future growth will likely be lower than originally anticipated.
The BOC’s estimates indicate the Canadian economy grew by 2.4% in 2011 and is projected to increase by 2% and 2.8% in 2012 and 2013, respectively. It anticipates economic conditions returning to full capacity in Q3 2013, which is one quarter earlier than what was forecast in October.
Globally, the BOC said the economic outlook has deteriorated since October, when the MPR was released, due, in part, to the growing debt crisis in Europe, where the recession is expected to last longer and reach deeper than October’s report projected.
An overnight rate target of 1% means the bank rate is 1.25% and the deposit rate is 0.75%.
Emma Crawford