Bank of Canada holds interest rate at 1 per cent

As expected, the Bank of Canada has held its key interest rate at one per cent, after three straight hikes.

The central bank, led by governor Mark Carney, said the economy has weakened since the bank's last forecast in July.
"The economic outlook for Canada has changed," the bank's senior officials wrote in a statement.
"At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered."
The economic recovery has not been as strong as thought, with next year's growth estimated to be at 2.3 per cent, down from its earlier estimate of 2.9 per cent.
"This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending," the bank said.
Canada's economy will likely grow by three per cent this year, mostly due to a hot start.
The policy rate, which influences short-term interest rates offered by banks and other lending institutions, has been raised three times since June to the current level.
With the Canadian dollar surging, the domestic economy slowing and global uncertainty still lingering, most economists expect Carney to keep the interest rate as is for the rest of the year.
BNN's Michael Kane said economists are concerned that lost in all the dour news is the fact that the economy is growing.
"We have been out of a recession for well over a year but a lot of bad news . . . frightens people," Kane told CTV News Channel. "And when people see (the bad news) they think the economy might go into recession again.
"A three per cent growth rate, after what we've been through, is not bad for 2010."
The central bank said it will be a year longer than it previously estimated for the Canadian economy to return to full capacity. That won't until the end of 2012, the bank says.