Today, the Bank of Canada announced that it will be keeping its overnight lending rate at 0.5%, despite the impact of low oil prices on the Canadian economy.
According to a statement released by the bank, the economic projections set forth in July are unfolding as expected, with growth for 2015 coming in at 1.1%. “Signs of strength” in industries outside of the resource sector can be attributed to the low Canadian dollar and solid growth in the United States. The bank expects household spending to increase at a “moderate pace.”
Important to note, however, is that the growth in non-resource industries is not expected to completely offset the economic effects of the oil slump. The bank has lowered its expectations for the rest of 2015 as well as 2016 and 2017, citing that it is expected to take years for the economy to adjust to the decreased business investment and resource exports due to low commodity prices. Policy makers expect capital spending by oil and gas firms to fall about 20% in 2016.
The bank projects that the economy will expand by 2% in 2016 and up to 2.5% in 2017. Immediately following the announcement, the Canadian dollar plunged by 0.8 of a cent and continued to decrease throughout the day – ending off at 76.11 cents US.
The Bank of Canada is slated to meet again on December 2, however economists are predicting the overnight lending rate to hold steady at that point as well.