From the latest interest rate decision by the Canadian Central Bank:
The global economy continues to expand broadly as expected, but its
dynamic has moderated. In the United States, the process of
normalization of long-term interest rates has begun in the context of
stronger private domestic demand. Recent data, however, point to
slightly less momentum overall than anticipated. In Europe, there are
early signs of a recovery, and Japan’s situation remains promising. In a
number of emerging market economies, financial volatility has
increased, adding uncertainty to growth prospects, although China
continues to grow at a solid pace. Commodity prices have been relatively
stable, with geopolitical stresses putting some upward pressure on
global oil prices.
Uncertain global economic conditions appear to be delaying the
anticipated rotation of demand in Canada towards exports and investment.
While the housing sector has been slightly stronger than anticipated,
household credit growth has continued to slow and mortgage interest
rates are higher, pointing to a continued constructive evolution of
household imbalances. Looking through the choppiness of the recent data,
the level of Canada’s GDP is largely consistent with the Bank’s July
forecast. The output gap is expected to begin to narrow in 2014.
Inflation in Canada remains subdued. With inflation expectations
well-anchored, both core and total CPI inflation are expected to return
slowly to 2 per cent as the output gap closes.
Against this backdrop, the Bank has decided to maintain the target
for the overnight rate at 1 per cent. As long as there is significant
slack in the Canadian economy, the inflation outlook remains muted, and
imbalances in the household sector continue to evolve constructively,
the considerable monetary policy stimulus currently in place will remain
appropriate. Over time, as the normalization of these conditions
unfolds, a gradual normalization of policy interest rates can also be
expected, consistent with achieving the 2 per cent inflation target.
Overall, Canada is in in a situation much like the US.
While the country is growing, it is doing so at a slower rate.
But the interest rate is still low, indicating that low rates are not having the stimulative effect most would want.
Canada appears to be in the same situation as the US: growth at a rate just fast enough to keep us out of recession, but not enough to hit escape velocity.