October 25 2011
West Vancouver Real Estate - The Bank of Canada left its key interest rate on hold Tuesday, as expected, and warned the eurozone is headed for a "brief recession" as the global economy continues to slow "markedly."
Canada's economy has weakened as a result, and the central bank said it expects growth to slow through mid-2012, easing the threat of inflation.
"The combination of ongoing deleveraging by banks and household, increased fiscal austerity and declining business and consumer confidence is expected to restrain growth across the advanced economies," the bank said in a statement.
It said "the euro area —where these dynamics are most acute — will experience a brief recession," adding the region's debt crisis "will be contained, although this assumption is clearly subject to downside risks."
The Bank of Canada's decision the leave its benchmark lending rate at a near-record low one per cent comes as European leaders are set to approve measures Wednesday in Brussels to contain a debt crisis that has brought Greece to the brink of default and could also threaten European banks.
The crisis will also be addressed at a critical Group of 20 leaders meeting next month in France.
In Canada, despite a surprise jump in the inflation rate in September, the central bank said it still expects consumer prices to ease in the coming months and into next year.
The bank says Canada's economy will expand by 2.1 per cent this year, followed by 1.9 per cent growth in 2012 and 2.9 per cent in 2013.
"The weaker economic outlook implies greater and more persistent economic slack than previously anticipated, with the Canadian economy now expected to return to full capacity by the end of 2013," it said.
"As a result, core inflation (which excludes volatile items such as some food and energy products) is expected to be slightly softer than previously expected, declining through 2012 before returning to two per cent by the end of 2013. The projection for total inflation has also been revised down, reflecting the recent reversal of earlier sharp increases in world energy prices as well as modestly weaker core inflation."
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