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Bank of Canada holds rates, cuts growth forecasts on low oil

Reuters logo Reuters 2019-01-09
a sign on the side of a building: A sign is pictured outside the Bank of Canada building in Ottawa© Reuters/CHRIS WATTIE A sign is pictured outside the Bank of Canada building in Ottawa

OTTAWA, (Reuters) - The Bank of Canada held interest rates steady as expected on Wednesday and indicated the pace of future hikes could be more gradual as the economy is hit by slumping prices for oil, one of Canada's main exports.

The central bank cut its near-term growth forecasts to reflect the impact of weaker crude but said the slowdown should be temporary and predicted the economy would post above-potential growth in 2020.

The bank has raised rates five times since July 2017 and as recently as last month said the pace of future hikes could be sped up depending on economic data. It made clear on Wednesday however that such talk was redundant for now.

"Governing Council continues to judge that the policy interest rate will need to rise over time," it said in a statement. The bank had not previously used the words "over time" to describe how fast tightening could occur.

Looking ahead, the bank said exports and non-energy investment were expected to grow solidly, backed by foreign demand, a new North American free trade pact, the lower Canadian dollar and federal tax measures aimed at investment.

(Reporting by David Ljunggren; editing by Dale Smith)

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