Following the surprise announcement that Mark Carney will be departing to helm the Bank of England, it was back to business as usual at the Bank of Canada as interest rates were once again held constant at 1 per cent. The statement released this morning in support of the interest rate decision noted that while the global economy appears to have stabilized, it still remains vulnerable to major shocks from the US or Europe. The Canadian economy is growing at a slightly softer pace than the Bank expected, but is forecast to pick up in 2013. On inflation, the Bank sees core inflation returning to its 2 per cent target over the next 12 months.
The Bank once again noted that a gradual withdrawal of monetary stimulus would likely be required, though the timing of such withdrawal would be weighed against global and domestic developments including the evolution of household imbalances. We continue to forecast a 25 basis point increase in the Bank's overnight target rate occurring in mid-to-late 2013.