The Bank of Canada (BOC), which has maintained its rate since its last easing in July 2015, said consumption was robust and supported by new child benefits while the impact of federal infrastructure spending had yet to show up in economic data.
Business investment and non-energy exports continue to disappoint and while there have been gains in employment there is still a significant amount of economic slack, in contrast the United States, the BOC said, almost foreshadowing next week's U.S. Federal Reserve decision.
In October the BOC lowered its forecast for Canada's Gross Domestic Product to grow by 1.1 percent this year, down from 1.3 percent forecast in July, and to 2.0 percent in 2017, down from 2.2 percent. In 2018 the country's economy is still seen expanding by 2.1 percent.
Canada's GDP grew by an annual rate of 1.3 percent in the third quarter, up from 1.1 percent in the second quarter when oil output was affected by wildfires in Alberta.
Canada's inflation rate has risen in recent months but is still "slightly below expectations, largely due to lower food prices," the central bank said.
Headline inflation in October rose to 1.5 percent in from 1.3 percent in September while core inflation eased to 1.7 percent from 1.8 percent in the previous two months.
The BOC said the higher core inflation rate shows that economic slack is being offset by past exchange rate depreciation though this effect is dissipating.
Canada's dollar has been trending downward against the U.S. dollar since 2013 but reversed course in mid-January this year when it rose sharply. But since early May it has been easing but was trading at 1.33 to the USD this morning, still up 4.1 percent since the start of the year.
The Bank of Canada issued the following statement: