The Bank of Canada announced on March 6th that it is holding its target for the overnight rate at 1 per cent. The Bank sees economic growth in Canada picking-up through 2013, as growth in exports and business investment offset a slowdown in household spending and residential construction. On inflation, the Bank noted that low core and total CPI inflation have been more subdued than the Bank projected, owing to significant excess capacity in the economy. Given low inflation and what the Bank terms a "constructive evolution of imbalances" in the household sector (meaning a lower pace of debt accumulation), the Bank has walked back its previous rate tightening bias stating that, "current levels of monetary stimulus will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required."
Weak economic growth through the second half of last year will likely bleed into the first half of 2013, which means a continuation of subdued inflation of just over 1 per cent. In fact, the outlook for growth and inflation is weak enough that, if the Bank had not spent the last year voicing concern over the perilous state of household finances, a 25 basis point cut in the Bank’s overnight target would be increasingly likely. Instead, the Bank will probably put a future rate hike on hold for the foreseeable future, with rates gradually increasing in 2014.
After a slight decline in January, hiring in the Canadian economy picked up in February adding 51,000 new jobs. The National unemployment rate remains at 7 per cent.
BC employment expanded by 19,800 jobs in February, including 13,500 full-time jobs. The BC unemployment rate remained constant at 6.3 per cent.