Great News-Bank of Canada holds rate at 1%

Real Estate Agent with Forest Hill Real Estate Inc, Brokerage

 Governor Mark Carney says domestic recovery will be more gradual than projected, and global turnaround 'entering a new phase'

 JEREMY TOROBIN OTTAWA- Globe and Mail Update

Tuesday, Oct. 19, 2010 09:10AM EDT

Bank of Canada governor Mark Carney kept his benchmark interest rate at 1 per cent Tuesday after three consecutive increases, saying the domestic recovery will be more gradual than projected, and the global turnaround is "entering a new phase."

In explaining his decision, Mr. Carney said while private demand in advanced economies will become "sufficiently entrenched" to sustain the recovery, a combination of high unemployment and efforts by governments and households to trim the debt they piled up during the recession will slow the pace of growth. Also, the emerging markets that have powered the bounceback will see growth tempered to a "more sustainable pace," Mr. Carney said. And spending by Canadian households will "decelerate to a pace closer to the rate of income growth" amid a cooler housing market and deleveraging.

"At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging economies, and domestic considerations that are expected to slow consumption and housing activity in Canada," the central banker said in the statement accompanying his decision, "any further reduction in monetary policy stimulus would need to be carefully considered."

 The Canadian economy will grow at a 3-per-cent pace this year, 2.3 per cent in 2011 and 2.6 per cent in 2012, the central bank said. That compares with Mr. Carney's July forecast of 3.5-per-cent growth for this year, 2.9 per cent in 2011 and 2.2 per cent in 2012.

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