OTTAWA: The Bank of Canada announced Wednesday it was keeping its key lending rate at one percent, the same low rate it has maintained for the past four years.
In a statement, the central bank cited the nation's low inflation rate, currently around two percent, as a major reason for maintaining its current key lending rate, also citing global economic headwinds.
"Underlying inflationary pressures are muted, given the persistent slack in the economy and the continued effects of competition in the retail sector," the statement said.
The central bank said prospects were bright for "stronger momentum" in the global economy over the next two years, but said "persistent headwinds continue to buffet most economies, and growth remains reliant on exceptional policy stimulus."
The bank also cited other areas of potential weakness, including "ongoing geopolitical uncertainties and lower confidence," its statement said.
It said however that the outlook for Canada's export sector is encouraging, particular for goods sent to its southern neighbor.
"Despite weakness elsewhere, the US economy is gaining traction, particularly in sectors that are beneficial to Canada's export prospects," the bank said, noting that "the US dollar has strengthened against other major currencies, including the Canadian dollar."
The bank said real growth in Canada's gross domestic product would be close to two-and-a-half percent over the next year, before settling at around two percent by the end of 2016.
"Together with a moderation in the growth of household spending, this is expected to gradually return Canada's economy to a more balanced growth path," the Bank of Canada statement said.
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