MNI POLICY: Text of Bank of Canada interest-rate decision>

     OTTAWA (MNI) -  The Bank of Canada today maintained its target for 

the overnight rate at 1 3/4 percent. The Bank Rate is correspondingly 2 

percent and the deposit rate is 1 1/2 percent. 

     The outlook for the global economy has weakened further since the 

Bank's July Monetary Policy Report (MPR). Ongoing trade conflicts and 

uncertainty are restraining business investment, trade, and global 

growth. A growing number of countries have responded with monetary and 

other policy measures to support their economies. Still, global growth 

is expected to slow to around 3 percent this year before edging up over 

the next two years. Canada has not been immune to these developments. 

Commodity prices have fallen amid concerns about global demand. Despite 

this, the Canada-US exchange rate is still near its July level, and the 

Canadian dollar has strengthened against other currencies. 

     Growth in Canada is expected to slow in the second half of this 

year to a rate below its potential. This reflects the uncertainty 

associated with trade conflicts, continuing adjustment in the energy 

sector, and the unwinding of temporary factors that boosted growth in 

the second quarter. Business investment and exports are likely to 

contract before expanding again in 2020 and 2021. At the same time, 

government spending and lower borrowing rates are supporting domestic 

demand, and activity in the services sector remains robust. Employment 

is showing continuing strength and wage growth is picking up, although 

with some variation among regions. Consumer spending has been choppy, 

but will be supported by solid income growth. Meanwhile, housing 

activity is picking up in most markets. The Bank continues to monitor 

the evolution of financial vulnerabilities in light of lower mortgage 

rates and past changes to housing market policies. 

     The Bank projects real GDP will grow by 1.5 percent this year, 1.7 

percent in 2020 and 1.8 percent in 2021. This implies that the current 

modest output gap will narrow over the projection horizon. Measures of 

inflation are all around 2 percent. CPI inflation likely will dip 

temporarily in 2020 as the effect of a previous spike in energy prices 

fades. Overall, the Bank expects inflation to track close to the 2 

percent target over the projection horizon. 

     All things considered, Governing Council judges it appropriate to 

maintain the current level of the overnight rate target. Governing 

Council is mindful that the resilience of Canada's economy will be 

increasingly tested as trade conflicts and uncertainty persist. In 

considering the appropriate path for monetary policy, the Bank will be 

monitoring the extent to which the global slowdown spreads beyond 

manufacturing and investment. In this context, it will pay close 

attention to the sources of resilience in the Canadian economy - notably 

consumer spending and housing activity - as well as to fiscal policy 

developments. 

     Information note: The next scheduled date for announcing the 

overnight rate target is December 4, 2019. The next full update of the 

Bank's outlook for the economy and inflation, including risks to the 

projection, will be published in the MPR on January 22, 2020. 

                         ** MNI OTTAWA ** 

[TOPICS: M$C$$$,MACDS$]