Bank of Canada Statement Highlights

Realization of several downside risks indentified in the Bank’s July Monetary Policy Report(MPR):

  • European sovereign debt crisis has worsened
  • U.S. credit rating downgraded
  • Slowing growth in the U.S. and other major global markets

U.S. economy to grow at slower pace than projected earlier:

  • The Bank expects American household spending will remain subdued
  • U.S. personal debt to linger at elevated levels
  • Overall decline in personal wealth
  • Challenging labor market conditions

European debt crisis to intensify:

  • Internal tensions resulting from Eurozone debt crisis could be obstacle to recovery
  • A generalized retrenchment from risk-taking

Persistent strength of Canadian dollar adds to problems facing producers:

  • Appreciating Canadian dollar making Canadian exports more costly to foreign buyers
  • Canadian dollar could continue to make gains if U.S. and Eurozone economies weaken further

Growth Projections

  • The Bank continues to expect that growth will accelerate in the second half of the year
  • Business investment and household expenditures to support this growth
    Policy Considerations
  • Bank has kept interest rates at lowest possible rate
  • Bank balance sheet has almost doubled to ensure liquidity for the banking system

Five Ways Bank of Canada will continue to support Canada’s economy:

  1. Provide monetary policy supporting low, stable, predictable inflation rate.
  2. Ensure core funding markets remain liquid.
  3. Continue to build a more resilient financial system.
  4. Monitor risks to financial stability and develop appropriate responses based on updated assessments.
  5. In conjunction with global counterparts, work to tackle the twin challenges of reducing excessive private and public debt.

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