Bank of Canada keeps interest rate at 1%, lowers inflation forecast

The central bank is lowering its forecast for inflation, even though the economy is showing signs of improvement.

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OTTAWA – The Bank of Canada is maintaining its key interest rate at one per cent, where it’s been for more than three years during a weak economic recovery from the last recession.

But the central bank is lowering its forecast for inflation, even though the economy is showing signs of improvement.

It says Canadian inflation has been lower than expected and won’t return to its ideal target for about two years.

The bank says Canada’s economic growth in the second half of 2013 was better than expected — rising to 2.5 per cent in the fourth quarter.

For the full year, the bank is projecting the economy grew by 1.8 per cent in 2013 and will pick up to 2.5 per cent in both 2014 and 2015.

It says stronger demand in the United States as well as the lower Canadian dollar should help boost exports, which will also improve business confidence and investment.

The bank says it will make its next interest rate announcement on March 5 and release its updated outlook for the economy and inflation — including risks to the projection — on April 16.

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