OTTAWA: Canada’s central bank maintained its key lending rate at 0.5 percent on Wednesday, citing a “climate of heightened uncertainty” following this year’s massive wildfires and Britain’s decision to leave the EU.
“Real GDP grew by 2.4 percent in the first quarter but is estimated to have contracted by 1 percent in the second quarter, pulled down by volatile trade flows, uneven consumer spending, and the Alberta wildfires,” the Bank of Canada said in a statement.
The central bank added that “in the wake of Brexit, global markets have materially re-priced a number of asset classes.”
The decision marks the second consecutive month that the Bank of Canada has maintained the lending rate at a half-percent, following the huge hit to the economy from the wildfires which forced cutbacks in oil sands production.
Officials have estimated that destruction by fire of homes and businesses in the Fort McMurray, Alberta area and the temporary shutdown of oil production there would shave about 1.25 percentage points off Canada’s gross domestic product in the second quarter.
Insurance industry figures last month showed the infernos caused CAN $3.58 billion ($2.75 billion) in damage, making it the country’s costliest disaster ever.
Meanwhile, Britain’s referendum decision last month to quit the European Union has roiled global finances and triggered deep economic uncertainty in international markets.