"The slowdown in the second half of 2012 was more pronounced than the Bank had anticipated"
- The Bank of Canada
The Bank of Canada left its key rate unchanged on Wednesday, and lowered its growth forecast for this year, as the economy is growing at a slower pace than expected. The benchmark interest rate held steady at 1% for the 19th consecutive time, as widely was expected. In the meantime, the rate has been at 1% for more than two years. The Canadian economy is now expected to expand by 2% in 2013, while a previous estimate, made in October, called for a 2.3% growth. However, Canada cannot count on household spending as the debt stabilised at around the record 165% of annual disposable income, while credit growth slowed sharply from a peak of 12% in 2008 to 5.5% in 2012.
"The slowdown in the second half of 2012 was more pronounced than the Bank had anticipated," the bank said in a statement posted on its website on Thursday.
"At a minimum that removes talk of 2013 hike risk and should cause a change in consensus forecasts," Scotiabank economist Derek Holt noted. "This is an even more dovish turn for the Bank of Canada than we had anticipated, but it supports my bias that the [bank] is very possibly on hold through 2013-14."
© Dukascopy Bank SA