The Bank of Canada (BOC), which surprised markets by cutting its rate by 25 basis points in January, said economic growth in the fourth quarter of 2014 was in line with its expectations and most of the negative impact on income and demand would appear in the first half of 2015.
"Nevertheless, data for 2014 as a whole suggest the anticipated rotation into stronger growth in non-energy exports and investment is well under way," the BOC said, adding:
"In light of these developments, the risk around the inflation profile are now more balanced and financial stability risks are evolving as expected in January."
Canada's Gross Domestic Product expanded by a faster-than-expected 0.6 percent in the fourth quarter of 2014 from the third quarter for annual growth of 2.63 percent, down from 2.75 percent, while inflation fell to 1.0 percent in January from 1.5 percent.
Canada's dollar has been falling against the U.S. dollar since July 2014 but the depreciation picked up speed following the BOC's rate cut on Jan. 21. Today the Canadian dollar strengthened following the decision to keep rates steady and was trading around 1.245 to the U.S. dollar, down 6.8 percent this year.
The Bank of Canada issued the following statement: