As expected, there was no change in prime at the Bank of Canada announcement this morning because tighter credit conditions and the high currency is sucking the steam out of the Canadian economy.
According to the Central Bank, the economy is operating in overdrive but it predicts this trend won't last for long.
Even though the U.S. lowered their rate last month by .5%, the Canadian economy is vastly different from that our neighbours to the south of the border.
Tighter global credit conditions have had little effect on domestic demand in Canada. But the combined effect of a weaker U.S. outlook and a higher assumed level of the Canadian dollar means net exports will drag more on the economy over the next two years than previously expected, the bank said in a press release. It predicts the Canadian economy will grow 2.6% in 2007, 2.3 % in 2008 and 2.5% in 2009, with inflation clocking in at 2% in the second half of 2008.
The bank described the risks to its inflation projections as roughly balanced, with a slight tilt to the downside.
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