About the Bank

The latest from the Bank of Canada

The most up-to-date information on Bank actions, policies, and economic projections can be found in the press releases, speeches, publications and other sections of this website.

“Now is not the time to rest on our laurels. Public and private boldness, both at home and abroad, will be required to secure the recovery.”

Mark Carney, Governor, Bank of Canada
16 June 2010, Charlottetown, PEI

The outlook

Economic recovery in Canada is unfolding largely as expected, led by government and consumer spending, according to the Bank of Canada's July 2010 Monetary Policy Report (MPR). The Canadian economy is now producing almost as much as it did just before the recession hit.

Reflecting a weaker and more uncertain outlook for the global economy, Canada's economy is now projected to grow by 3.5 per cent in 2010 and 2.9 per cent in 2011 – somewhat slower than was projected in the April MPR – and 2.2 per cent in 2012. As a result, the economy is expected to be running at full capacity by the end of 2011, six months later than foreseen in April. Inflation is expected to remain near the Bank's 2 per cent target through to the end of 2012.

The policy interest rate

On 20 July, the Bank raised its key policy interest rate from 1/2 per cent to 3/4 per cent. This rate influences lending rates offered by financial institutions, demand for goods and services, and, ultimately, inflation.

(In April 2009, when the economy was in recession, the policy rate was set at 1/4 per cent – a historic low and its lowest possible level. To further stimulate economic activity, the Bank also made an exceptional commitment at that time to maintain that low rate until June 2010, conditional on the outlook for inflation. After the economy picked up in the first months of 2010, the Bank removed that conditional commitment in April, and the rate was raised to 1/2 per cent on 1 June 2010.)

The Bank says that, at 3/4 per cent, the policy rate will still "leave considerable monetary stimulus in place" to help keep the recovery on track, consistent with achieving the Bank's inflation target of 2 per cent. Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

The background

Global recovery, vital to Canada's economy, is under way but is not yet self-sustaining, since private sector activity has not yet fully replaced public sector stimulus introduced in response to the crisis.

• Consumers, businesses, and governments in a number of advanced countries are focused on reducing debt, which is moderating global growth. In particular, as households save more and reduce debt and the government unwinds its stimulus program, growth is expected to be slower than anticipated in the United States (Canada's largest export market).
• In Europe, austerity measures have been taken in response to the debt crisis in some European Union countries. While these measures should promote sustainable long-term growth, they are slowing the immediate global recovery.
• The boom is easing somewhat in emerging-market economies such as China, where growth is expected to be 8-9 per cent in 2011-12, compared with 12 per cent over the past year. These economies typically buy a lot of commodities and influence their prices in world markets. Those prices are important for Canada because we are a major producer and exporter of commodities.

Domestic factors are also restraining growth in Canada:

• Consumption growth is expected to be more modest than was foreseen in April, reflecting slower income growth.
• Residential investment has contracted markedly with the expiry in January of Canada's home renovation tax credit, the tightening of mortgage criteria, the rise in mortgage rates, and higher house prices.
• While employment growth in Canada has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

For more details on the Bank's latest monetary policy decision and analysis, and risks to the Bank's projections, please consult the July 2010 Monetary Policy Report.

Ten facts you should know about the Bank of Canada

1. The Bank of Canada is the country's central bank, owned by the people of Canada. It is located in Ottawa, with regional offices across the country.
2. The Bank of Canada is not a commercial operation and does not offer banking services to the public.
3. The Bank was created by the federal government in 1934 "to promote the economic and financial welfare of Canada."
4. To inform all of our policies, we conduct exhaustive research and analysis on economic and financial issues.
5. We focus on preserving the purchasing power of Canada's money by keeping inflation low, stable, and predictable – as close as possible to the inflation-control target of 2 per cent. We achieve this by setting the policy interest rate, which influences commercial bank rates and thus the level of economic activity in Canada.
6. We help promote an efficient, reliable financial system which, relative to others around the world, proved to be resilient in the 2007-09 financial crisis.
7. We oversee the country's supply of bank notes and work with commercial banks, retailers, schools, and police to combat counterfeiting.
8. We act as the federal government's banker.
9. When a Canadian bank account is inactive for 10 years, the assets are transferred to the Bank of Canada, which now holds over one million unclaimed bank balances, worth some $395 million. On our website, search unclaimed balances for money you may have forgotten about.
10. Our website offers a wealth of general information, as well as online economic data, analysis, and tools. Look for About the Bank, Backgrounders, Video, Celebrating 75, our Publications page, and visit www.currencymuseum.ca. Also search for More Rates and Statistics, the Credit Conditions website, the Inflation Calculator, and the Currency Converter.