OTTAWA—The Bank of Canada downgraded its economic outlook due to systematic weakness in exports and the short-term impact on the housing market stemming from the federal government’s latest measures in its Oct. 19 interest rate decision and Monetary Policy Report (MPR).
In a dovish press release, Canada’s central bank announced it is leaving its overnight rate target at 0.50 percent. This was widely expected, although the Bank’s Governing Council actively discussed cutting rates.
The Bank’s narrative has revolved around a revival of non-energy exports to lead the economic transition, but the first half of 2016 proved to be a major disappointment.
The BoC said the rebound in exports in July and August was not enough to make up for lost ground in the previous five months. The decline in exports is the largely responsible for the fall in 2016 second-quarter gross domestic product (GDP).
“Our latest projections incorporate a permanent shortfall in exports relative to our understanding of fundamentals,” Bank of Canada Governor Stephen Poloz said in the opening remarks at a press conference in Ottawa.
