BOC Monetary Policy Statement From October 25 - Text>

     OTTAWA (MNI) -  The following is the complete text of the Bank of 

Canada policy statement issued Wednesday. The July 12, 2017 statement 

follows for comparison: 

     The Bank of Canada today maintained its target for the overnight 

rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and 

the deposit rate is 3/4 per cent. 

     Inflation has picked up in recent months, as anticipated in the 

Bank's July Monetary Policy Report (MPR), reflecting stronger economic 

activity and higher gasoline prices. Measures of core inflation have 

edged up, in line with a narrowing output gap and the diminishing 

effects of lower food prices. The Bank projects inflation will rise to 2 

per cent in the second half of 2018. This is a little later than 

anticipated in July because of the recent strength in the Canadian 

dollar. The Bank is also mindful that global structural factors could be 

weighing on inflation in Canada and other advanced economies. 

     The global and Canadian economies are progressing as outlined in 

the July MPR. Economic activity continues to strengthen and broaden 

across countries. The Bank still expects global growth to average around 

3 1/2 per cent over 2017-19. However, this outlook remains subject to 

substantial uncertainty about geopolitical developments and fiscal and 

trade policies, notably the renegotiation of the North American Free 

Trade Agreement. 

     Canada's economic growth in the second quarter was stronger than 

expected, and was more broad-based across regions and sectors. Growth is 

expected to moderate to a more sustainable pace in the second half of 

2017 and remain close to potential over the next two years, with real 

GDP expanding at 3.1 per cent in 2017, 2.1 per cent in 2018 and 1.5 per 

cent in 2019. Exports and business investment are both expected to 

continue to make a solid contribution to GDP growth. However, projected 

export growth is slightly slower than before, in part because of a 

stronger Canadian dollar than assumed in July. Housing and consumption 

are forecast to slow in light of policy changes affecting housing 

markets and higher interest rates. Because of high debt levels, 

household spending is likely more sensitive to interest rates than in 

the past. 

     The Bank estimates that the economy is operating close to its 

potential. However, wage and other data indicate that there is still 

slack in the labour market. This suggests that there could be room for 

more economic growth than the Bank is projecting without inflation 

rising materially above target. 

     Based on this outlook and the risks and uncertainties identified in 

today's MPR, Governing Council judges that the current stance of 

monetary policy is appropriate. While less monetary policy stimulus will 

likely be required over time, Governing Council will be cautious in 

making future adjustments to the policy rate. In particular, the Bank 

will be guided by incoming data to assess the sensitivity of the economy 

to interest rates, the evolution of economic capacity, and the dynamics 

of both wage growth and inflation. 

     -- 

     The following is the text of the BOC statement released on July, 

2017: 

     The Bank of Canada is raising its target for the overnight rate to 

1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the 

deposit rate is 3/4 per cent. 

     Recent economic data have been stronger than expected, supporting 

the Bank's view that growth in Canada is becoming more broadly-based and 

self-sustaining. Consumer spending remains robust, underpinned by 

continued solid employment and income growth.  There has also been more 

widespread strength in business investment and in exports. Meanwhile, 

the housing sector appears to be cooling in some markets in response to 

recent changes in tax and housing finance policies. The Bank continues 

to expect a moderation in the pace of economic growth in the second half 

of 2017, for the reasons described in the July Monetary Policy Report 

(MPR), but the level of GDP is now higher than the Bank had expected. 

     The global economic expansion is becoming more synchronous, as 

anticipated in July, with stronger-than-expected indicators of growth, 

including higher industrial commodity prices. However, significant 

geopolitical risks and uncertainties around international trade and 

fiscal policies remain, leading to a weaker US dollar against many major 

currencies. In this context, the Canadian dollar has appreciated, also 

reflecting the relative strength of Canada's economy. 

     While inflation remains below the 2 per cent target, it has evolved 

largely as expected in July. There has been a slight increase in both 

total CPI and the Bank's core measures of inflation, consistent with the 

dissipating negative impact of temporary price shocks and the absorption 

of economic slack. Nonetheless, there remains some excess capacity in 

Canada's labour market, and wage and price pressures are still more 

subdued than historical relationships would suggest, as observed in some 

other advanced economies. 

     Given the stronger-than-expected economic performance, Governing 

Council judges that today's removal of some of the considerable monetary 

policy stimulus in place is warranted. Future monetary policy decisions 

are not predetermined and will be guided by incoming economic data and 

financial market developments as they inform the outlook for inflation. 

Particular focus will be given to the evolution of the economy's 

potential, and to labour market conditions. Furthermore, given elevated 

household indebtedness, close attention will be paid to the sensitivity 

of the economy to higher interest rates. 

--MNI Ottawa Bureau; email: yali.ndiaye@marketnews.com

[TOPICS: M$C$$$]