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Econ 3077 management of financil institution - Coursework Example

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Due to the weighty decline in the global oil prices, the Bank of Canada has lowered its projected overnight rate target by a quarter of a percentage to three-quarters per cent. Consequently, the bank rate is 1 % while the deposit rate is 0.5 percent. The persistence of inflation…
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Econ 3077 management of financil institution
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The Bank of Canada The Bank of Canada Due to the weighty decline in the global oil prices, the Bank of Canada has lowered its projected overnight rate target by a quarter of a percentage to three-quarters per cent. Consequently, the bank rate is 1 % while the deposit rate is 0.5 percent. The persistence of inflation in the global market has reflected in the fall of the oil prices (Bank of Canada, 2015). For this reason, the underlying inflation in the country might have an adverse impact on the economic growth. In the recent quarters, inflation has remained at 2 percent, and sector-specific factors cause it. Consequently, the effects are manifested in the poor performance of the Canadian dollar.
The decline in the oil prices is expected to boost the global economic growth. It is projected that the rate will decrease to US $60 per barrel. In addition to the price decline in the energy sector, there is an increased foreign demand, business assurance and venture, as well as employment rates (Bank of Canada, 2015). However, the weak terms of trade will affect the country’s incomes and wealth by reducing the domestic demand growth.
The Bank of Canada projects that the real GDP growth will slow by 1.5% followed by the widening of the output gap in the first half of 2015. The Banks monetary policy, the weaker Canadian dollar and the strong US economy will gradually mitigate the lower oil prices. As a result, the economy will strengthen leading to 2.1 and 2.4 growths in the real GDP in the year 2015 and 2016 respectively.
The current overnight rate target is 0.75%
The current bank rate is 1 %
The current deposit rate is 0.5% (Bank of Canada, 2015)
References
Bank of Canada. (2015, January 21). Bank of Canada lowers overnight rate target to 3/4 per cent - Bank of Canada. Retrieved from http://www.bankofcanada.ca/2015/01/fad-press-release-2015-01-21/ Read More
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