Bank of Canada: Wildfires to trim 1.25 percent off second quarter growth
By Leah Schnurr and David Ljunggren
OTTAWA (Reuters) - Damage from the wildfires in Alberta will shave 1.25 percentage points off economic growth in the second quarter, though a speedy rebound was likely, the Bank of Canada said on Wednesday in a statement that was considered more hawkish than expected.
The preliminary assessment was in contrast to the 1.0 percent annualized growth the central bank forecast in April for the second quarter, and leaves the economy on course for a contraction in the quarter after a strong start to 2016.
"The second quarter will be much weaker than predicted because of the devastating Alberta wildfires," said the bank, which kept its main policy rate at 0.50 percent, as expected.
The fires are estimated to have cut daily oil production by more than 1 million barrels and taken half the nation's oil sands capacity offline.
Still, the central bank anticipates a third-quarter rebound as production restarts and reconstruction begins.
The Canadian dollar strengthened against the greenback following the decision. [CAD/]
"They offered a downside assessment of the Alberta wildfires as something preliminary but they do characterize this as a transitory shock, which will prove to not impact bank policy, in our view," said David Tulk, chief Canada macro strategist at TD Securities.
"The currency market has interpreted it as a more hawkish statement." Continued...