OTTAWA - The Bank of Canada held interest rates steady on Wednesday, as expected, saying that while growth has been stronger than it anticipated in January it is "too early" to conclude that the economy is on a sustainable growth path.
Reiterating its position that material excess capacity remains in the economy, the central bank nudged up its growth forecast for 2017 but lowered its projection for potential growth to reflect "persistently weak investment."
Taken together, the faster growth in 2017 and lower potential growth means the bank now projects the output gap to close in the first half of 2018, sooner than the mid-2018 timeline policymakers predicted in January.
In a report that noted a weakness for every strength, the bank said business investment remains well below what could be expected at this stage in the recovery and wage growth remains subdued, while residential investment has been stronger than expected.
"The Bank's Governing Council acknowledges the strength of recent data, some of which is temporary, and is mindful of the significant uncertainties weighing on the outlook," the bank said in a statement accompanying its quarterly Monetary Policy Report.