Canada is less positive on the world economy than at its last meeting as it continues to hold rates. “The global economic recovery is proceeding broadly in line with the Bank’s projection,” the statement said. Last month, that same recovery had been proceeding “at a somewhat faster pace than the Bank had anticipated”.

It’s not all gloomy, though. Canada’s recovery is “proceeding slightly faster than expected” this month. Still, expect interest rates to remain on hold for some time yet: It remains the case that “any further reduction in monetary policy stimulus would need to be carefully considered.”

Two former rate-raisers are now holding their interest rates, meaning all of the G7 countries are now on hold.

Australia is holding its cash rate at 4.75 per cent, confirming a slow and steady approach to normalisation, following a rapid set of increases from its low of 3 per cent in late 2009. Is the RBA anticipating worsening terms of trade with China? That’s what the FT’s Lex suggested today, calling the Australians “smart” to prepare for the change ahead.

Canada, which cut rates lower and started raising later, is sticking at 1 per cent for its overnight rate and 1.25 per cent for its bank rate (graphed). The Bank cited “increased” risks, saying that weaker exports were dragging down growth. Read more

Canada’s central bank is the latest to ask whether central banks should expand their remit beyond inflation targeting. “If we look only at interest rates, inflation and output, we may miss bubbles and other elements of systemic risk as they build,” Canada’s deputy central bank governor said on Tuesday.

Tiff Macklem said the Bank needed to develop models that include elements of banking and capital markets. “When the financial system is not working normally,” he said, “we cannot rely on the short-cut from interest rates to output and inflation.” The WSJ recently reported the Fed was also developing a more comprehensive model, the Quantitative Surveillance Mechanism (QSM)Read more

Consumer prices rose 1.7 per cent in Canada in the 12 months to August, close to the Bank’s 2 per cent target but a 0.1pp fall from July. Core prices (excluding energy) rose to a healthy 1.6 per cent. Many had expected CPI to rise.

The fall in inflation, though slight, would support the idea of a rate pause. The Bank of Canada raised rates on September 8, despite issuing a pretty gloomy outlook on the economy. This rate rise – which came after the end of the inflation period – will likely dampen inflation further in the coming months.

The Bank of Canada has raised the target for its overnight rate 25bp to 1 per cent, and its bank rate to 1.25 per cent, in spite of a rather bearish outlook:

Economic activity in Canada was slightly softer in the second quarter than the Bank had expected, although consumption and investment have evolved largely as anticipated.  Going forward, consumption growth is expected to remain solid and business investment to rise strongly. Both are being supported by accommodative credit conditions, which have eased in recent weeks mainly owing to sharp declines in global bond yields. Read more

Canada was the first G7 country to start raising rates, and has enjoyed consistent growth for nine months, bar a static April. Latest data show slight growth in May of 0.1 per cent.

However, data show non-farm payrolls fell in May by 0.2 per cent, or 25,000 people. To add to the mixed picture, the central bank reduced growth forecasts 10 days ago, even as it raised rates, and three days later, inflation fell to just 1 per cent. It seems Ben Bernanke’s oft-quoted description of unusual uncertainty, would apply equally well north of the border.

Canadian consumer price inflation has once again touched one of its target boundaries (2 per cent +/- 1 per cent). Consumer prices rose 1 per cent in the 12 months to June, following a 1.4 per cent increase in May.

Energy prices explain most of the drop. Energy prices rose 1.3 per cent between June 2009 and June 2010, having increased 6.2 per cent in the 12 months ending in May. Excluding energy, the CPI advanced 0.9 per cent in June, compared to 1 per cent in May. Read more

G20 nations must implement policies agreed at the latest summit, otherwise “large imbalances may re-emerge, with the attendant risk of disorderly adjustment.”

This from the Bank of Canada’s latest Monetary Policy Report, which finds Canadian growth “proceeding largely as anticipated” and risks to Canada’s economy roughly balanced. Read more

As expected, the Bank of Canada has just raised its overnight lending rate to 0.75 per cent, its bank rate to 1 per cent and its deposit rate to 0.5 per cent. Growth forecasts were reduced, however, and the bank now expects the economy to return to full capacity at the end of 2011, two quarters later than anticipated in April:

“The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.” Read more

Canada’s is the third central bank in a week to cite increased downside risks to the economy. “The overall level of risks to Canadian financial stability has increased” in the past six months said the Bank of Canada’s financial stability review. Read more