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Bank of Canada Holds Key Interest Rate Steady at 1%
Mar 9,2012 08:47CST
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Source:SMM
The Bank of Canada held its key interest rate at one percent Thursday, although its tone on the outlook of the world and Canadian economy is obviously better than before.

OTTAWA, Mar.9 -- The Bank of Canada held its key interest rate at one percent Thursday, although its tone on the outlook of the world and Canadian economy is obviously better than before.

"Heightened uncertainty around the global economic outlook has decreased," the bank said in a statement.

"Recent developments suggest that the outlook for the Canadian economy is marginally improved," the statement added.

The Bank said that private demand in Canada is expected to be "slightly stronger than expected," household spending will " remain high relative to GDP," and exports are rising as the U.S. economy recovers as well.

However, the bank remains concerned that Canadians are adding too much debt to their personal balance sheets, saying the debt burden remains the biggest domestic risk.

For months, Mark Carney, the bank's governor, has been warning Canadians about the high level of their personal debt. Much of that new debt has been taken on by home buyers. Some economists have expressed skepticism that Canada's housing boom, fueled by cheap mortgage money, can continue.

The bank's statement came as the Canadian Mortgage and Housing Corporation (CMHC), the federal government's mortgage insurance company, announced continued growth in Canadian housing starts.

The bank also said that the inflation rate is "somewhat firmer than previously anticipated" due to factors including higher energy prices.

The bank anticipated that inflation will average about 2 percent over the forecast horizon.

"Reflecting all of these factors, the bank has decided to maintain the target for the overnight rate at one percent," it added.

 

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