It’s all about the Bank of Canada today. The latest Monetary Policy Report is out and it offers a generally more positive outlook.
The Bank projects the Canadian economy will grow by 2.4% in 2012 and 2013, then moderate to 2.2% for 2014. The economy is expected to return to full capacity in the first half of next year. Total and core inflation are expected to be around 2% for the rest of the forecast period.
The Bank notes three upside risks to inflation: higher than expected oil prices; a stronger than expected U.S. recovery; and stronger momentum in Canadian household spending.
The two downside risks to inflation centre on a resurgence of sovereign debt troubles in Europe and weaker than expected household spending.
The Bank is projecting that private domestic demand will be, pretty much, the sole economic driver in Canada for the term of the outlook, as households continue to pile on debt. Canada’s high household debt to income ratio remains the Bank’s number-1 domestic economic concern.
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