Ottawa, Ontario, Canada (AHN) – Economists agree that the Bank of Canada will likely keep interest rates at its present level until July 2011.

They believe that Bank of Canada Governor Mark Carney will wait for developments in the U.S. economy and the eurozone.

The Canadian central bank is expected to release its decision on the key lending rate on Tuesday after the monetary board meeting.

The current key lending rate is still a low 1 percent. The governor kept it at that level due to uncertain economic conditions and a lower-than-expected third quarter growth rate due to weak trade and real estate investments.

The fixed-income markets predict 50-50 odds that the Bank of Canada will increase key lending rates in March and 100 percent chance in April.

According to the C.D. Howe Institute, the central bank should keep benchmark interest rates on Tuesday and on Jan. 18. It also forecast that by July next year the key lending rate should not exceed 1.5 percent.

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Dublin, Ireland, United Kingdom (AHN) – Ireland is defending its low corporate tax rates even in the midst of talks over a European Union-led bailout for its troubled economy.

Ireland’s corporate tax rate of 12.5 percent is much lower than the EU average, however Deputy Prime Minister Mary Coughlan says that rate is not negotiable.

Officials from the EU, the European Central Bank and the IMF are expected to formulate a bailout plan sometime next week.

High-tax nations such as Germany and France want Ireland to increase its corporate tax rate. However, some observers say Ireland’s fiscal problems stem not from low corporate taxes but high spending by the Irish government.

Ireland’s low corporate tax rate has attracted foreign investment. Proponents of keeping the tax low say it would not make sense to hamper the nation’s economic engine.

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“Given the current situation, companies have thought ahead and prepared for exchange rate fluctuations as well as an increase in labour costs,” Chen said, according to the state-run China Business News.

“But because the issuance of dollars is out of control, and international commodities prices are continuing to rise, China is confronted with imported inflation, which has created major uncertainties for businesses,” he said.

The comments came ahead of a meeting of the US Federal Reserve next week at which the central bank is expected to announce additional stimulus measures.

While critics in the United States accuse China of artificially undervaluing its currency to give exporters an unfair advantage, Beijing says Washington is foisting its economic woes on the rest of the world by printing more money.

Beijing pledged in June to let the yuan trade more freely and the currency has since strengthened slightly, but US and European policymakers say it could be undervalued by as much as 40 per cent.

At the weekend, Group of 20 finance ministers meeting in South Korea pledged to “refrain from competitive devaluation of currencies” and aim for “more market-determined exchange rate systems”.

Jittery financial markets were looking for a strong stand from G20 members against beggar-thy-neighbour currency policies, in the leadup to a November 11-12 summit in Seoul.

Chinese Finance Minister Xie Xuren urged “major reserve currency countries to take responsible economic policies”, with the dollar sliding on expectations that the Federal Reserve would launch even bolder monetary easing.

China’s central bank on Wednesday set the central parity rate at 6.6912, weaker than the 6.6762 on Tuesday. The yuan can trade up or down 0.5 per cent from that mark. – AFP

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Ottawa, Ontario, Canada (AHN) – Bank of Canada announced Tuesday it is keeping the overnight lending rate at 1 percent because of the change in Canada’s economic outlook.

From a strong first quarter growth, the Canadian central bank said it expects economic recovery to be slower than its original projection in the July Monetary Policy Report. Under the revised projection, the bank said the gross domestic product growth rate is forecast to reach 3 percent in 2010, 2.3 percent in 2011 and 2.6 percent in 2012.

The bank attributed the more modest growth projections to a reflection of the gradual global recovery and reduced consumer spending as households give higher priority to paying off debts. With this development, the bank said household spending would slow to a pace closer to income growth.

The overall impact of this would be demand in Canada would veer from government and consumer spending to business investment and net exports.

The bank said Canada’s inflation rate is slightly below its July forecast.

The bank said the combination of all these factors led it to maintain the benchmark lending rate at 1 percent. By using this strategy, the bank said there would still be considerable monetary stimulus in place, which would be consistent with reaching a 2 percent inflation target during a period of significant excess supply in Canada.

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London, England, United Kingdom (AHN) – The United Kingdom registered an inflation rate of 3.1 percent for September, according to the Office for National Statistics. The rate has been unchanged since July.

Decreases in air fares and gas prices were offset by a major rise in clothing and food prices, leading to the static Consumer Price Index, the ONS said. Prices of airfares dipped by 27.8 percent in September, but clothing and footwear prices logged a 6.4 percent increase and furniture and furnishings prices surged 4 percent.

It is the first time since 1992 that clothing and footwear prices went up. Economists theorized the jump in prices is because of retailers raising their prices ahead of the forthcoming increase in the value added tax.

The 3.1 percent inflation rate, however, is way off the Bank of England’s 2 percent target. Experts said the static CPI would add pressure on the British central bank’s Monetary Policy Committee, which decides if they will retain the record-low 0.5 percent key lending rate.

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Washington, D.C., United States (AHN) – The Chinese government announced Wednesday it would allow the value of its currency to rise one day before a vote in Congress on whether to penalize countries that undervalue their money.

China will “further improve” its currency exchange rate and “increase the flexibility” of the yuan, the People’s Bank of China said in a statement on its Web site.

U.S. economists accuse China’s government of subsidizing its currency exchange rate to make it artificially low compared to the currency of the United States and other countries.

As a result, its manufactured products can be sold internationally at lower prices compared with competitors.

Some members of Congress say the undervalued Chinese currency is unfair competition that is forcing American manufacturers out of business and has cost millions of jobs.

A bill in Congress would allow American companies to petition the U.S. government to impose tariffs on the products of any country with undervalued currency, such as China.

The bill is set for a vote Sept. 30 in the House of Representatives. The Senate plans to vote on its version of the same bill after the November elections.

“The bill we vote on this week will help level the playing field for American businesses and workers,” House Majority Leader Steny Hoyer (D-Md.) said in a speech Tuesday.

However, a new Congressional Budget Office report questions whether the proposed legislation would be effective in equalizing trade between China and the United States.

Some economists say China’s undervalued currency helped it surpass Japan this year as the world’s second largest economy. China beat out Germany last year as the biggest exporter.

Chinese government reforms would “enhance exchange rate flexibility against the backdrop of a recovering global economy,” the People’s Bank of China announcement said.

However, it gave no details of the planned reforms.

Some members of Congress are skeptical of the Chinese government’s sincerity.

In June, the Chinese made other pledges to stop underwriting the value of their currency.

Since then, the value of the Chinese yuan has risen only 2 percent while the value of the U.S. dollar declined amid ongoing economic problems.

During congressional hearings in recent weeks, economists said China’s exchange rate has contributed to the high U.S. unemployment rate, which stands at 9.6 percent.

Congress is under pressure from voters and industry to create more jobs.

The Precision Metalforming Association, a trade group of small auto-parts makers, said in a statement this week that China’s currency exchange rate “gives an unfair and illegal advantage to our overseas competition.”

China’s central bank did not mention the pending congressional bill in its announcement Wednesday of currency reform measures.

The new value of the yuan would be “based on market supply and demand with reference to a basket of currencies,” the Web site announcement said.

If Congress does approve the trade bill, the new tariffs are likely to raise only $20 million a year, a Congressional Budget Office report released this week said.

The $20 million a year is tiny compared with the $1 billion per day China imports into the United States, the report said.

“Many [Chinese] imports do not injure domestic firms because there are no competitors currently operating in the United States,” the Congressional Budget Office report said.

U.S. businesses that previously made the products already have shut down after being overwhelmed by foreign competition.

As a result, there are likely to be few U.S. manufacturers who would petition for the U.S. government to impose tariffs on Chinese competitors, the Congressional Budget Office reported.

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