The Bank of Canada(BoC)is lowering its economic growth forecast for 2007 mostly due to reduced demand for Canadian exports.

“With the slower growth in the U.S. economy, output growth in Canada has also decelerated,” the bank said in its Monetary Policy Report Update.

The BoC now projects the economy to grow by 2.3% in 2007 down from its previous forecast of 2.5%.

But the bank kept its 2008 growth forecast of 2.8% intact because it expects the economy to operate near its production capacity.

The report also discussed why it kept interest rates steady on Dec. 5, 2006 and Jan. 16, 2007. “In line with the bank’s outlook, the current level of the policy rate is judged, at this time, to be consistent with achieving the 2% inflation target over the medium term,” the bank said.

To read the report, click here.

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