Canada's central bank left its benchmark target for the overnight rate unchanged at 0.5 percent, as expected, and trimmed its growth and inflation forecasts.
The Bank of Canada (BOC), which has cut its rate twice this year by 50 basis points, added that the risks to inflation were "roughly balanced" and risks to financial stability were as expected although the risks to households' financial situation had edged higher.
While it acknowledged that global growth had been weaker than expected this year, the BOC said "the dynamics pointing to a pickup in 2016 and 2017 remain largely intact" when the positive effects of cheaper energy and easy financial conditions should become increasingly evident.
Solid growth in the United States will continue to help Canada's exports and signs of a rebound in the country's non-resource sectors are also becoming "more evident" helped by the decline in the exchange rate of the Canadian dollar and past rate cuts, the BOC said.
In its monetary policy report, the BOC maintained its forecast for Gross Domestic Product growth for the fourth quarter of this year at 0.7 percent while the forecast for Q4 2016 was lowered to 2.5 percent from 2.8 percent forecast in July.
For Q4 2017 the forecast was cut to 2.2 percent from 2.3 percent, with the BOC expecting the country's economy to return to full capacity, and inflation at its 2.0 percent target, by mid-2017.
Inflation has evolved largely as the BOC forecast in July with the forecast for consumer price inflation steady at 1.4 percent for the fourth quarter of this year. But for 2016 the inflation forecast was lowered slightly to 1.6 percent in the fourth quarter from a previous 1.9 percent. For 2017 inflation is seen averaging 2.0 percent in all four quarters.
Canada's headline inflation rate was steady at 1.3 percent in August and July while GDP expanded by an annual 1.0 percent in the second quarter, down from 2.0 percent in the first quarter.
The Bank of Canada issued the following statement: