Canada has room for further policy easing, IMF says
2013-02-15 12:12:08
The International Monetary Fund on Thursday said that Canada has room to ease monetary policy further, if growth prospects weaken significantly.
"There remains scope for further monetary policy easing to support economic activity should growth prospects weaken significantly," the Fund said in an annual report on Canada.
However, directors at the Executive Board agreed that the current monetary policy stance is "appropriately accommodative."
It urged the central bank to start the tightening cycle only when growth strengthens again, given the negative output gap, well-anchored inflation expectations, and a challenging global environment.
Canada's economic growth is expected to pick up later in 2013, the Fund said. According to IMF, the balance of risks remained tilted to the downside as the high level of household debt may amplify the impact of adverse external shocks.
The gross domestic product is forecast to rise 1.8 percent this year and then accelerate to around 2.5 percent by 2014-15. At the same time, private consumption and residential investment are expected to contribute less to growth than in the recent past as households deleverage and the housing sector continues to cool off.
Canada's near-term adverse risks remained elevated, in particular from continued uncertainty on U.S. fiscal policy, further turbulence from Europe, and a decline in commodity prices driven by an economic slowdown in emerging markets, the lender observed.