BoC leaves rate unchanged

Bank of Canada governor Mark Carney. (JOCELYN MALETTE/QMI Agency)

Bank of Canada governor Mark Carney. (JOCELYN MALETTE/QMI Agency)

Jessica Murphy, Parliamentary Bureau

, Last Updated: 12:38 PM ET

The Bank of Canada is maintaining its target for the overnight rate at 1%.

In a news release Tuesday morning, the central bank pointed to an intensified sovereign debt crisis in Europe, projected slow economic growth in the U.S., a cooling Chinese economy and low commodity prices - except oil - for keeping the rate near historic lows.

Overnight rates have been kept at 1% since September 2010.

Since October, when the Bank of Canada released its last monetary policy report, the global economy has become increasingly shaky.

"The recession in Europe is now expected to be deeper and longer than the bank had anticipated in October," the release says.

The U.S. is also still struggling with a faltering housing market, the impact of the eurozone debt crisis, and fiscal consolidation.

The central bank is projecting only modest growth for the Canadian economy, with soft foreign demand for Canadian exports further dampened by a high Canadian dollar.

The Canadian economy grew by 2.4% in 2011, according to the bank's estimates, and is expected to grow 2% in 2012 and 2.8% in 2013, returning to full capacity by the third quarter of 2013.

Inflation is expected to be moderate this year and rise to 2% near the end of 2013.

The ratio of household debt to income is also expected to rise ‹ despite warnings from Bank of Canada governor Mark Carney in December that Canadian household debt is spinning out of control.

On Wednesday, the central bank will release its January monetary policy report, with its full forecast for the economy and inflation.