Articles
Economy slowing slightly in 2007, 2008: Bank of Canada
Aug 28, 2006 - 4:40:00 PM

July 13, 2006

The Bank of Canada has nudged up its outlook for the Canadian economy for the rest of the year, but trimmed its forecast for 2007 and 2008.

In an update to its monetary policy review released Thursday, the central bank said consumer demand will help keep the economy humming into next year despite declining exports due to the strong Canadian dollar.

The bank said the economy is now expected to grow by 3.2 per cent this year, up from 3.1 per cent projected in April.

"We are reasonably comfortable sitting where we are right at the moment," Bank of Canada Governor David Dodge told reporters on Thursday in Ottawa. "But if the world changes, we’ll have to react to that."

As the effect of the rise in the loonie takes hold, economic growth is seen slowing slightly - 2.9 per cent next year and 2.8 per cent in 2008. A slowing of U.S. economic growth and the effect of past interest rate hikes will also factor in the anticipated slowdown, the bank said.

The latest forecast from the central bank comes two days after it held the line on interest rates. On Tuesday, the bank left its key overnight rate at 4.25 per cent, ending a string of recent increases. The bank said it judged that rates are now at a level that will keep a lid on inflation.

Inflation is seen averaging just over 1 1/2 per cent from mid-2006 to mid-2007 after factoring in the reduction in the GST to six per cent beginning July 1.

The next interest rate decision by the bank is set for Sept. 6.