The Bank of Canada keeps its key interest rate unchanged as it downgraded its 2019 growth forecast based on its prediction the economy nearly ground to a halt at the start of the year.
Interest rates aren’t expected to climb any time soon, given the dismal growth forecast for the foreseeable future.
The economy was performing really well in 2017 and 2018, the final three months of last year saw the economy expand by just 0.4 per cent.
This dramatic slowdown was largely caused by a drop in oil prices, weaker exports and low investments. The bank says its effects have spilled into 2019.
In its latest quarterly projections, also released Wednesday, the bank predicted growth in real gross domestic product of 1.2 per cent for 2019, down from its January forecast of 1.7 per cent. The Bank of Canada projected growth of just 0.3 per cent in the first three months of 2019.
The central bank, however, also predicted better days ahead.
The economy should pick up its pace in the second quarter on expectations of stronger housing activity, consumer spending, exports and business investment, the bank said. It expects the economy to build momentum through 2019 before returning to above-potential growth of 2.1 per cent in 2020 and two per cent in 2021.
The bank said its new, slightly lower estimated range is between 2.25 and 3.25 per cent.
Economists expect no change in interest rates at least until the end of the year. If any cut at all were to come it would be very rare and unlikely.
The Bank of Canada, which was widely expected to stand pat on the rate Wednesday, will make its next policy announcement on May 29. -CINEWS