The Bank of Canada Wednesday cut its economic growth forecast for the country and left interest rates unchanged, while insisting the next move in interest rates would likely be a hike. The bank slashed its prediction for 2013 economic growth to 1.5 percent - matching this week's International Monetary Fund (IMF) forecast - from the 2.0 percent it saw in January, and hopes for 2.8 percent growth in 2014. The central bank warned of the prospect of higher interest rates down the road. “With continued slack in the Canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector, the considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required," the central bank said. Also Wednesday, the bank's Monetary Policy Report noted a 32 percent increase in prices for Western Canada Select (WCS) since its January report, following a similarly sharp decline in late 2012. “WCS prices are expected to remain volatile until sufficient transportation capacity is in place. This volatility adds to the uncertainty facing Canada's energy sector, which is expected to remain a factor restraining Canadian business investment," the central bank said. The Bank of Canada said that despite the recovery in WCS prices in recent months, some firms were reevaluating their projects. Likewise, it said that many mining firms had shifted to lower-cost projects that pose less risk in an environment of sluggish world demand and growing world supply.
