Bank of Canada keeps interest at 3 percent

Ottawa -- The Bank of Canada left its overnight interest rate at 3 percent Tuesday, and warned of coming global and domestic inflation.

In a statement in Ottawa, the bank said since its last rate review in April, commodity prices were continuing to outstrip expectations and Canadian economic growth in the first quarter was weaker than expected.

The six governors forecast Canadian gross domestic product to grow by just 1 percent in 2008, 2.3 percent in 2009, and 3.3 per cent in 2010, when they anticipated a return to less economic turmoil.

"High terms of trade, accommodative monetary policy, and a gradual recovery in the U.S. economy are expected to generate above-potential growth starting early next year, bringing the economy back to full capacity around mid-2010," the bank said.

The bank also predicted soaring oil prices would be a consumer price index factor for at least two more fiscal quarters.

"Assuming energy prices follow current futures prices over the projection period, total CPI inflation is projected to rise temporarily above 4 percent, peaking in the first quarter of 2009," the bank said.

Canada's CPI in May was 2.2 percent.

Copyright 2008 by United Press International.