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