The overnight rate will remain at 1%, the Bank of Canada announced April 16, keeping it at the same level it has been since September 2010.
Canada’s real gross domestic product growth is still expected to average around 2.5% in 2014 and 2015, followed by an easing off to about 2% in 2016. The bank downgraded its projection for 2014’s first quarter to 1.5% from 2.5%, but increased Q3’s projection to 2.6% from 2.5%.
Overall global growth is expected to pick up over the next three years, increasing 3.3% in 2014 and 3.7% in both 2015 and 2016. These levels remain consistent with those predicted in the bank's January Monetary Policy Report. Canadian exporters are facing strong competition but many sectors have been seeing growth. This, in part, reflects economic recovery in the United States, helped by the lower Canadian dollar and in spite of stalled growth due to the recent harsh weather.
The economy in Europe has seen modest growth but uncertainty persists due to the crisis in the Ukraine. The bank expects growth in China and other emerging markets to be steady.
"We continue to believe that rising global demand for Canadian goods and services, combined with the assumed high level of oil prices, will stimulate business investment in Canada and shift the economy to a more sustainable growth track," the bank said in a news release.
Inflation is expected to remain well below the bank's target rate of 2% in 2014, driven in part by increased retail competition. Increasing consumer energy prices and a lower Canadian dollar will push inflation upward toward the target rate in the coming quarters, however.
The bank continues to anticipate a soft landing in the housing market and stabilizing household debt-to-income ratios, but cautions "household imbalances remain elevated and would pose a significant risk should economic conditions deteriorate."
The Bank of Canada's next rate decision will be on June 4.
