Bank of Canada maintains key interest rate

THINK OUTSIDE THE BOX:  Although many were expecting a rate cut from the Bank of Canada this morning, they have decided to hold the benchmark rate at 0.5%.  Read more to find out why.

OTTAWA — The Bank of Canada is holding its benchmark interest rate at 0.5 per cent even as it downgrades its growth outlook for an economy hit by falling commodity prices.

The central bank made the scheduled announcement today as the country adjusts to a complex mix of sliding resource prices, a falling Canadian dollar and weaker business investment.

There were some expectations that Bank of Canada governor Stephen Poloz would cut the rate given the poor economic forecasts.

The bank says it maintained the already-low rate because the key indicator in its decision — inflation — has been unfolding as expected within its ideal target range.

The Bank of Canada lowered its economic growth forecast — as measured by real gross domestic product — to 0.3 per cent for the final three months of 2015.

That’s down from its October estimate of 0.7 per cent.

It also downgraded its 2016 growth projection to 1.4 per cent from its fall forecast of two per cent.

The bank expects the economy to eventually rebound and see growth of 2.4 per cent in 2017.

The central bank says it anticipates economic benefits from the federal government’s promise to spend billions of dollars on infrastructure — but it won’t factor in the potential impact of the measures until the details have been announced.

Canadian Press      January 20, 2016

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