With your host Hank Cunningham
Bank of Canada hikes rates again
July 10, 2007
Bank of Canada Press Release below -
09:00 10Jul2007 RTRS-BANK OF CANADA RAISES KEY INTEREST RATE 1/4-PT TO 4.50 PCT; MODEST FURTHER INCREASE MAY BE REQUIRED
09:00 10Jul2007 RTRS-BOC SEES TOTAL CPI AND CORE CPI DECLINING TO 2 PCT BY EARLY 2009, LATER THAN IN APRIL PROJECTION
09:00 10Jul2007 RTRS-BOC-INFLATION IS NOW PROJECTED TO BE SLIGHTLY HIGHER AND MORE PERSISTENT THAN IN APRIL OUTLOOK
09:00 10Jul2007 RTRS-BOC-ECONOMY IS OPERATING FURTHER ABOVE ITS PRODUCTION POTENTIAL THAN WAS EXPECTED IN APRIL
09:00 10Jul2007 RTRS-BOC SEES 2007 GDP GROWTH AT 2.5 PCT VS 2.2 PCT PREVIOUSLY; SEES SLOWER GROWTH IN 2008-09
09:00 10Jul2007 RTRS-BOC REVISES '08, '09 GDP GROWTH OUTLOOK TO 2.5 PCT FROM 2.7 PCT ON STRONG C$, HIGHER INTEREST RATES
09:00 10Jul2007 RTRS-BOC RAISES ASSUMED RANGE FOR THE CDN DOLLAR TO 93-95.5 U.S. CENTS FROM 86.5-89.5 U.S. CENTS PREV.
09:00 10Jul2007 RTRS-BOC SEES AGGREGATE DEMAND AND SUPPLY IN CANADIAN ECONOMY BACK IN BALANCE IN 2009
09:00 10Jul2007 RTRS-BOC SAYS MAIN UPSIDE AND DOWNSIDE RISKS TO ITS INFLATION PROJECTION APPEAR TO BE ROUGHLY BALANCED
09:00 10Jul2007 RTRS-BOC-MAIN RISKS TO OUTLOOK ARE STRONGER HOUSEHOLD DEMAND, HIGHER C$ AND U.S. HOUSING ADJUSTMENT
09:00 10Jul2007 RTRS-Bank of Canada raises interest rate to 4.50 pct
OTTAWA, July 10 (Reuters) - The Bank of Canada raised its key overnight interest rate on Tuesday by one-quarter point to 4.50 percent and kept the door open to further hikes, saying inflation has been persistently higher than expected.
"Some modest further increase in the overnight rate may be required to bring inflation back to the target over the medium term," the central bank said in a statement explaining its first rate hike since May 2006.
The bank tempered its hawkish tone by saying that the risks to its inflation outlook appear to be roughly balanced. On the one hand, stronger-than-expected household demand in Canada could push inflation higher while on the other, an appreciation of the Canadian dollar and the U.S. housing downturn could help keep prices steady.
The bank now sees both total inflation and core inflation, which excludes volatile items, staying above its 2 percent target until early 2009. Previously, it had seen total inflation declining to 2 percent by mid-2008 and core inflation reaching the target by the end of 2007.
The economy is operating further above its production potential than was expected in April, the bank said, and it now sees the Canadian economy expanding by 2.5 percent in 2007 instead of 2.2 percent previously. Growth will moderate in 2008 and 2009 to about 2.5 percent annually on the effects of the strong Canadian dollar and higher interest rates, the bank said. It previously forecast growth of 2.7 percent in both years.
((Reporting by Louise Egan; Reuters Messaging: firstname.lastname@example.org: Tel 613-235-6745))