22 January 2007

 

 

… The bottom line: On the whole, the Bank of Canada believes that output growth in Canada decelerated as 2006 came to close largely due to some special factors, namely adjustments in the U.S. housing and auto sectors. However, there are signs a significant amount of the adjustment has already taken place. As a result, growth in Canada is expected to pick up from about 1.6% in the second half of last year to average about 2.5% in the first half of 2007 and about 2 3/4% in the second half of this year. The Bank stated that "in line with the Bank’s outlook, the current level of the policy rate is judged, at this time, to be consistent with achieving the 2% inflation target over the medium term". Assuming that the Bank's scenario materializes, there is now an increased probability that interest rates are unlikely to decline this year.