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October 22, 2014BANK OF CANADA MONETARY POLICY REPORT The Bank of Canada announced it is maintaining its target for the overnight rate at 1 percent and released the Monetary Policy Report - October 2014, providing the Bank's outlook for the global and Canadian economies.
With the outlook for economic growth diverging across regions, the Bank of Canada lowered projections for world economic growth in 2015 and 2016. Recovery in the US, as private deleveraging and fiscal consolidation are nearly complete, will be more robust while the euro area and Japan have shown signs of losing momentum as they struggle with persistent headwinds and structural reforms. Conditions in emerging markets have also diverged, with political developments benefiting India and Indonesia (as successful political transitions have been made) but weakening others such as Brazil, Russia, Turkey. China is expected to average around 7 per cent growth over 2014-2016 with support from accommodative monetary policy and targeted fiscal measures as economy rebalances and the housing market softens.
Highly accommodative monetary policies continue to contribute to economic recoveries in many countries and have been key to developments in financial markets which have seen long term bond yields decline and the downward repricing of riskier assets. Commodity prices have declined with global crude oil prices falling to four year lows. Increased supply, particularly from Libya and US shale oil production and weaker anticipated global demand account for the falling oil prices. Prices of non-energy commodities have softened in recent months with agriculture and base metal prices falling. The retreating in commodity prices have lowered the projection for Canada's terms of trade through 2015 and 2016.
