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Winnipeg Free Press - PRINT EDITION

Ultra-low interest for near future likely

By: Staff Writer

Posted: 09/6/2012 1:00 AM | Comments: 0

OTTAWA -- The Bank of Canada is hinting it will need to keep interest rates at super-low levels for a while longer, saying stronger economic growth isn't in the cards for the country until next year.

As expected, the bank's policy-setting panel headed by governor Mark Carney kept the trendsetting interest rate at one per cent on Wednesday, the same level it's held for the past two years.

And while Carney left his tightening bias unchanged -- meaning the next move will likely be to raise rates -- his suggestion low interest rates are at least partly responsible for keeping Canada's economic head above water in the face of global turbulence hinted at continuing that policy.

"In Canada, while global headwinds continue to restrain economic activity, underlying momentum remains at a pace roughly in line with the economy's production potential," the bank said in an accompanying statement.

"Economic growth is expected to pick up through 2013, with consumption and business investment continuing to be its principal drivers, reflecting very stimulative financial conditions."

But CIBC chief economist Avery Shenfeld said with the trend of growth at about two per cent, the economy is unlikely to make much progress in closing the output gap -- the measure of when the economy is running on all cylinders.

Canada recorded a modest 1.8 per cent growth rate in both the first and second quarter of this year, and projections are for a similar tepid performance in the second half of the year.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 6, 2012 B5

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