Wednesday, January 18, 2012

Bank of Canada Governor: Europe situation will slow Canada's growth

  The governor of the Bank of Canada Mark Carney claims that the European debt crisis will slow both Canadian growth and global growth. Carney predicted that Canadian growth will be lower by approximately .6 per cent for the year. This will mean the Canadian GDP will be about 10 billion lower than otherwise.
    Carney decided that the Bank's key interest rate would remain at 1 per cent, a very low rate. As well he estimated that the debt crisis in Europe would lower the global growth rate by one per cent and growth in the U.S. economy by .8 per cent.
    As he has done earlier Carney warned about the high level of personal debt in Canada. This runs at about one hundred fifty per cent of personal income. Carney said:"High household debt levels in Canada could lead to a sharper-than-expected deceleration in household spending," "If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy."
     Many think that the bank will not raise interest rates this year as long as the economy is sluggish and inflation low. But some analysts think that by the middle of next year there will be some hikes in the rates. For more see this CBC article.

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