By: DailyForex.com
The Bank of Canada left its key overnight lending rate at 0.50 per cent on Wednesday, stating that the domestic economy has been expanding as expected despite low oil prices and other pressures. The decision to leave the rate as is had been anticipated by most economists.
In its statement, the Bank of Canada said exports in non-resource areas were being helped by the ongoing U.S. recovery, a lower Canadian dollar, and the central bank's two interest rate cuts earlier this year.
The low Canadian dollar has made Canadian products more attractive in foreign markets helping exports of goods to rise 2.7 per cent in the quarter, led by strong increases in cross-border shipments of motor vehicles and parts. Increases in household spending also helped to drive the growth.
GDP Contracts
Canada's economy picked up in the third quarter showing signs of officially ending the mild recession that hit the country in the first two quarters of 2015. The economy expanded at an annual pace of 2.3 per cent in the three months that ended in September, slightly below economists' expectations of 2.4 per cent growth, while the GDP contracted 0.5 per cent month-over-month, more than anticipated and following three consecutive months of growth.
Economists see the contraction as a sign that the recovery will most probably not be maintained.
According to TD Bank economist Brian DePratto, "There is good reason to believe that the relatively strong growth of the third quarter will not be repeated."