BOC maintains overnight rate target

The BOC remained its monetary policy unchanged at a meeting on Wednesday. At that time, the bank lowered its forecast concerning economic growth as a reaction to unstable outlooks of investments and weak export.

The overnight rate remained at 0.5%. The BOC stated in a covering letter that fundamental factors continue to support economic growth, but the global situation became more uncertain. This statement is connected with the UK’s referendum. Corporative projections regarding investments are carefully observed, while exports have been less than expected. The investment data, as well as expectations on export were revised down, levelling positive signs from correction of commodity prices.

It is expected that Canada’s economy decreased during the Q2 on the background of fires in Alberta. At that time, the BOC notes that there is demand from the US. If this tendency preserves, monetary stimulation and recovery after fires can support economic growth in Q3 and Q4.

The BOC expects GDP growth to be 1.3% this year versus 1.7% in the previous report. Economic growth for the next year was cut by 0.1% from the previous forecast to 2.2%.