OTTAWA, Feb 8 (Reuters) - The Bank of Canada upheld on Monday its commitment to keep its benchmark interest rate unchanged at a record low 0.25 percent until the end of June, conditional on inflation staying on track.
'On 19 January, the bank reaffirmed its conditional commitment to hold its policy rate at 1/4 percent until mid- 2010 in order to achieve its inflation target,' Deputy Governor Pierre Duguay said, according to a slide presentation he was giving in Levis, Quebec, and posted on the central bank's website.
Duguay maintained the bank's inflation and growth outlook and repeated that the strong Canadian dollar and weak U.S. demand would continue to act as 'significant drags on economic activity'.
In a report released Jan. 21, the central bank painted a slightly more upbeat outlook for the Canadian economy, raising most of its quarterly forecasts for growth and inflation. At the same time, it has warned that there is still considerable excess supply in the economy and inflation will not return to the bank's 2 percent target until the third quarter of 2011.
Duguay's comments followed a meeting of Group of Seven finance ministers and central bank governors, who pledged to withdraw their extraordinary stimulus very carefully to avoid hampering the fragile recovery now under way.
The French-speaking province of Quebec, which has the second biggest population in the country, suffered a milder recession than the rest of Canada, Duguay said. Economic growth in Quebec resumed in the third quarter of 2009 and likely strengthened in the fourth quarter, he said.
Duguay attributed Quebec's resilience to a provincial infrastructure program announced in 2007, with projects ready when the recession began; business restructuring done before the crisis; lesser reliance on the automotive sector and more stable housing prices.
(Reporting by Louise Egan; editing by Peter Galloway) Keywords: CANADA ECONOMY/DUGUAY
(louise.egan@thomsonreuters.com; +1 613 235-6745; Reuters Messaging: louise.egan.reuters.com@reuters.net)
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