Bank of Canada holds rates, sees faster recovery

Thu Sep 10, 2009 9:10am EDT
 
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OTTAWA (Reuters) - Canada's economy may grow faster than expected in the second half of this year, the Bank of Canada said on Thursday while holding its key interest rate unchanged at 0.25 percent, as expected.

The bank said expansionary fiscal and monetary policies, improved financial markets, commodity prices and confidence had all boosted domestic demand in Canada. "Combined with recent information on inventory adjustments and automotive production, this suggests that GDP growth in the second half of 2009 could be stronger than the bank projected in July," it said in a statement.

In its July outlook, the bank projected average annualized growth of 2.15 percent in the second half, with 1.3 percent in the third quarter and 3.0 percent in the fourth.

The central bank once again warned that "persistent strength in the Canadian dollar" remained a risk to the economic recovery and to inflation, and said it could react by taking unconventional measures as needed to support growth, such as printing money.

But its language on the currency was no tougher than in recent statements and speeches. Most market players do not believe the bank will intervene to brake the currency's nearly 21 percent surge from a four-year low in March. (Reporting by Louise Egan; Editing by Randall Palmer)

 
<p>The Bank of Canada building is pictured in Ottawa July 30, 2009. REUTERS/Chris Wattie</p>