The Bank of Canada gave a surprise by maintaining its target overnight rate at 1/2 percent today, judging that the underlying trend in inflation continues to be about 1.5 to 1.7 percent. Even before the landslide sweep of the Liberal Party into power, assuring a more stimulative fiscal policy next year, the Bank was widely expected to stand pat for the foreseeable future.
The Bank now estimates third quarter growth to have been roughly 2.5 percent with a slowdown to 1.5 percent growth in the current quarter. This would put this year's real GDP growth at a mere 1.1 percent, well below the 2.4 percent pace last year and under performing the growth in the U.S. by a wide margin, says Dominion Lending Centres.
Canada's economy has been hit hard by the massive decline in oil prices. But, as well, Canadian exports are no longer as sensitive to an acceleration in U.S. growth as they once were, largely reflective of the contraction in the relative importance of the Canadian automotive sector.
