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Bank of Canada lowered macroeconomic forecasts for 2016

Bank of Canada kept interest rates unchanged but lowered its macroeconomic forecasts for 2016. The central bank in Canada decreased by 0.4 percentage points its forecast for GDP growth in 2016 to 1.3%. The finance institution also lowered forecasts for 2017 to 2.2% from 2.3%. The regulator left interest rates at a record low level of 0.5%, as largely fulfilled the expectations of the markets. Most economists actually expect the bank to refrain from actions by the end of 2017 or early 2018 before considering tightening monetary policy.

The Governor of Bank of Canada, Stephen S. Poloz, and his team are concerned about the increased indebtedness of households, and expectations that the planned fiscal spending will begin to have an effect in the second half of 2016. The planned measures in costs and tax system could add around 0.5 percentage points to economic growth in fiscal 2016-2017, which began on April 1, according to the central bank.

Last year, Canada’s central bank cut interest rates twice, trying to cope with the sharp drop in oil prices, which weighed on the economy directly dependent on raw materials.

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