Bank Of Canada Raises 2005 Growth Forecast

The Bank of Canada has raised its growth forecast for 2005 gross domestic product to 2.8% from its July forecast of 2.7%, but lowered its forecast for next year. The central bank said in its monetary policy outlook that it now projects 2.9% growth in 2006, down from its earlier outlook calling for a 3.3% expansion.

"Past and recent movements in energy prices and in the exchange rate for the Canadian dollar, along with competitive pressures from China and other newly industrialized economies, are giving rise to significant ongoing adjustments in the Canadian economy. This has resulted in considerable variation in the growth patterns of sectors and regions, making an assessment of overall capacity pressures and of the future growth of potential output particularly complex," the central bank said.

As for inflation, the bank said the pace of consumer price increases "probably spiked above 3.0% in September" and would likely hold at a 3% pace for the rest of 2005 and the first half of 2006 before returning to the 2.0% target in the second half. "In contrast, core inflation should remain below 2.0% in coming months," it said.

Copyright Agence France-Presse, 2005

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