Canadian economy to cool down: Bank
of Canada Politics Watch ® News Services
October 18, 2007, updated 1:13 p.m.
|Bank of Canada Governor David Dodge speaks
with reporters in Ottawa Thursday.
OTTAWA (PoliticsWatch.com) —
The Bank of Canada said Thursday it had altered its economic
forecast for Canada because of the stronger Canadian dollar and a
"weakened" U.S. economy.
"In particular, the tightening of credit conditions in
the U.S. mortgage market will have a larger and more persistent
impact on demand for Canadian exports, especially building materials
and consumer goods," the Bank of Canada said in its
October monetary policy report.
The central bank said there had been "significant economic and
financial developments" since its last report in July.
The bank now predicts Canada's gross domestic product will grow by
2.3 per cent in 2008, lower than the 2.6 per cent it had forecasted
In a statement to reporters, Bank of Canada Governor David Dodge
warned of problems ahead if the Canadian dollar continues to trade
at higher levels than the U.S. dollar.
"The main downside risk is that output and inflation could be
lower if the Canadian dollar were to be persistently higher than the
assumed average level of 98 cents U.S. for reasons not associated
with demand for Canadian products," he said.
The bank also said it expects its lending rate to remain at 4.5 per
cent "over the medium term."
Dodge explained that in July the bank had predicted that it would
likely be increasing the lending rate in the future, but that
changed primarily because of a weaker U.S. economic forecast.
In July, the bank had predicted the U.S. economy would grow by three
per cent next year. It has now lowered that projection to 2.1 per
cent because of the U.S. housing market.
"Things have happened since July," Dodge said.
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