-Bank of Canada
The Bank of Canada trimmed its benchmark overnight interest rate by 25 basis points to 0.50%, amid a more severe than expected effect of the sharp drop in oil prices and a weak recovery in non-energy sector. The central bank also downgraded its growth estimate compared to its April projection. The economic output is expected to have contracted modestly in the first half of the year, leading to higher excess capacity and additional downward pressure on inflation. However, the BoC predicts growth to resume in the three months through September and to exceed potential in the fourth quarter, supported by the non-resource sectors of the economy. The central bank now forecasts Canada's GDP to increase by just over 1% in 2015 and around 2.5% in the subsequent two years. According to the BoC's estimates, the economy will return to full capacity and inflation to 2% on a sustained basis in the beginning of 2017. Thus, the bank said extra monetary stimulus is required to ensure the economy is moving towards full capacity, while consumer prices are approaching the targeted level.
Meanwhile, Canada's manufacturing sales rebounded in May, after briefly falling into negative territory in the preceding month. Manufacturing sales climbed 0.1% on a monthly basis, following the 2.1% drop in April, according to Statistics Canada. Analysts, however, had expected a 0.3% rise.
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