The Bank of Canada has maintained interest rates at 1 percent after warning that the recession in Europe will be worse than expected.
Bank of Canada Governor Mark Carney said in a statement Tuesday that monetary stimulation is needed to prevent the economic slowdown from worsening and spreading.
‘Uncertainty around the global economic outlook has increased in the weeks since the bank released its quarterly forecast in October,’ Carney said.
He noted that conditions in global financial markets have deteriorated as the sovereign debt crisis in Europe has deepened, additional measures will be required to contain the European crisis, reported Xinhua.
Carney said the slowdown will be worsened by tighter credit, government spending cuts and reduced business and consumer borrowing in Europe.
He said US growth is also expected to be hampered by reduced spending by consumers who are trying to reduce the debts, spending cuts by governments and ‘negative spillover effects from the European crisis’.
Carney added that growth in China and other emerging-market economies ‘continues to be strong, although there are signs that it is moderating to a more sustainable pace in response to weaker external demand and the lagged effects of past policy tightening’.
The central bank raised its target for the overnight lending rate to its current level from 0.75 percent in September 2010.
The bank meets every six weeks to decide on its interest rate policy. The next meeting is scheduled for Jan 17.