July 21, 2009

Canada central interest rate unchanged

Canada's central bank announced in Ottawa Tuesday it was maintaining its one-quarter percent interest rate, and would leave it there until June 2010.

The Bank of Canada's monthly report said international economic recovery was taking place, but some factors slowed Canada's rebound.

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

Long-term, the bank forecast Canada's economy will shrink by 2.3 percent during the balance of this year and then grow by 3 percent in 2010 and 3.5 percent in 2011, reaching former capacity in the middle of 2011, the statement said.

The bank noted while consumer prices went into deflation by 0.3 percent in June, it expected the Consumer Price Index would return to the bank's 2 percent target in the second quarter of 2011 as supply and demand return to balance.