Bank Of Canada Downgrades Economic Growth Forecast, Holds Interest Rate At 1.75%

As expected, the Bank of Canada kept its benchmark interest rate at 1.75% at its latest policy meeting on Wednesday and indicated that it will stand pat on rates for the foreseeable future.

Economists who follow Canada’s central bank had forecast that interest rates would remain at their current levels.

"Growth during the first half of 2019 is now expected to be slower than was anticipated in January," the Bank of Canada said in a written statement announcing its decision to hold the line on interest rates.

In January, the central bank was expecting Canada's economy to grow by 1.7% this year. On Wednesday, it downgraded that forecast to 1.2% growth during 2019. Bank of Canada Governor Stephen Poloz said the bank expects the second half of this year to be better than the first.

"Right now, we believe that this setting of interest rates will give us the outlook that ... growth picks up in the second quarter and picks up for real in the third quarter for the second half of the year," said Governor Poloz.

An economy that grows by less than the inflation rate warrants low interest rates, which act as a stimulus for economic growth. The Bank of Canada said Wednesday that "an accommodative policy interest rate continues to be warranted."

The central bank's key interest rate impacts Canadians by influencing the interest that retail banks charge consumers on products such as mortgages and savings accounts.