This story from the Globe and Mail addresses the Bank of Canada’s latest quarterly economic report. Mark Carney has recently announced that benchmark interest rate will remain at the very low rate of 1%. According to the Bank of Canada, our country is in the midst of economic expansion, but the growth rate of our GDP for the current year has not met prospected analyst expectations. Carney said that this growth shortcoming is the reason interest rates will remain so low until mid to late next year.
What i find very interesting about this article, is much of the text is about the Bank of Canada warning consumers about over spending on credit. Apparently the average household spending to income ratio has increased to above 160% and is now considered a threat to the financial system. Carney’s announcement that the economic growth thus far in 2012 has not met expectations, while warning consumers not to spend so much, is quite contradictory. If the overspending by households is seriously threatening the financial system, then why wait until next year to push the interest rates up. I find it unrealistic that the Bank of Canada can attempt to boost GDP growth, while saying that exports will not significantly increase until 2014, and warning consumers to curb spending.