"I don't think we're going to see any raise in interest rates until 2018, possibly longer. The Bank of Canada needs to wait for the economy to go through this rotation towards non-energy exports and until it does that, it won't have a pillar to support the entire economy".
- Frances Donald, Manulife
The Bank of Canada kept its key interest rates unchanged on Wednesday, anticipating a substantial rebound in the second half of 2016, official data revealed. The Central bank left its key overnight interest rate unchanged at 0.50% for the 14th consecutive month. The bank stated the overall balance of risks remained at the level for which the current monetary policy seemed appropriate. Furthermore, the Bank of Canada pointed to rebounding oil production, damaged by the Alberta wildfires in May, and the rise in the Canada Child Benefit. Nevertheless, the Central bank said that the world economic growth is picking up at a slower pace than expected, missing their latest forecasts.
The Canadian economy contracted 1.6% in the Q2 amid severe damages caused by the wildfires in and around Fort McMurray, Alta. Despite promising comments from the Central bank, analysts remain cautious and sceptical. Thus, Avery Shenfeld, Chief Economist at CIBC, said on Wednesday that the Canadian economy will not reach a 2% growth until 2019. Analysts at CIBS forecast the economy to grow 1.8% in 2017, down 0.3% compared to its previous forecast, and 1.9% in 2018.
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