Canada central bank maintains key lending rate at 0.5%

Ottawa: Canada's central bank maintained its key lending rate at 0.5 percent Wednesday, upgrading its economic forecast in the wake of a massive government spending announcement.

The Canadian economy is expected to grow 1.7 percent in 2016 -- up from 1.5 percent predicted in January -- and 2.3 percent next year, according to the central bank, despite falling oil sector investments.

A multi-billion dollar stimulus announced by the federal government last month will help the country weather the oil rout.

But a recent uptick in the Canadian dollar and slower than expected growth in the United States -- Canada's largest export market -- are forecast to choke exports.

"The Canadian economy's complex structural adjustment to the oil price shock is ongoing and will dampen growth throughout the bank's projection horizon," the bank said in a statement.

"First-quarter GDP growth appears to have been unexpectedly strong, but some of that strength is due to temporary factors and is likely to reverse in the second quarter."

AFP