View Full Version : Light at the end of tunnel?

bob winter
07-21-2009, 11:51 AM
It seems things are looking up a bit.

OTTAWA — The Bank of Canada on Tuesday held its key interest rate unchanged and hiked economic growth forecasts for 2009 and 2010, saying this year’s recession would not be as deep as thought.

The central bank held its overnight interest rate at 0.25 per cent and reiterated its "conditional commitment" to leave it at the historically low level until the end of the second quarter of 2010, the bank said in a statement, citing low inflation risks.

The central bank projected the economy would contract 2.3 per cent in 2009 and then expand by 3.0 per cent in 2010.

In April, it had estimated a 3.0 per cent contraction this year and weaker growth of 2.5 per cent next year.

Amid the worst global recession since the Great Depression, the bank said there were "now increasing signs that economic activity has begun to expand in many countries in response to monetary and fiscal policy stimulus and measures to stabilize the global financial system.

"Effective and resolute policy implementation remains critical to sustained global growth," it said.

For the Canadian economy, the bank said the dynamics of the recovery remained in line with its medium-term outlook published in the bank’s April Monetary Policy Report, despite the upwardly revised growth estimates.

"Stimulative monetary and fiscal policies, improved financial conditions, firmer commodity prices, and a rebound in business and consumer confidence are spurring domestic demand growth," it said.

"However, the higher Canadian dollar, as well as ongoing restructuring in key industrial sectors, is significantly moderating the pace of overall growth."

Inflation risks remained weak, the bank noted.

Total consumer price index inflation declined to a negative 0.3 per cent in June and "should trough in the third quarter of this year before returning to the 2.0 per cent target in the second quarter of 2011 as aggregate supply and demand return to balance," it said.

Core inflation, which stood at 1.9 per cent in the second quarter of 2009, was expected to decline in the second half of 2009 before gradually returning to 2.0 per cent in the second quarter of 2011.

The bank said that "overall risks to its inflation projection are tilted slightly to the downside."

"Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target," the bank said.

© Copyright (c) The Ottawa Citizen

Bruce Hooke
07-21-2009, 01:02 PM
I've been hearing reports here as well that signs are pointing to an improving economy.

Of course the one of the last places for an economic turn-around to show up is in the employment numbers, which is what matters most to regular folks but if things start looking up in terms of the overall economy then eventually the employment numbers will follow.