Canada's central bank maintained its key lending rate at 0.5 percent Wednesday while signalling hope for an economic rebound in the coming months following a dismal first half of 2016. Recently released economic data showed the biggest quarterly decline in GDP in seven years in the second quarter due to a disruption of oil production caused by massive wildfires, while an across-the-board downturn in exports was the worst since 2009.
But the Bank of Canada said it expects to see a boost from government infrastructure spending and the resumption of oil production in the second half of the year. In a statement, it said the impact of the Alberta wildfires, which spread over 500,000 hectares (1.2 million acres) of dense forest, and the 4.5 percent drop in exports were "larger and more broad-based than expected."
Oil output was reduced in May by an estimated 1.2 billion barrels per day at a time when Canada's economy was still adjusting to the 2014 rout that sent crude prices plunging from above $100 per barrel to below $50. But as oil production recovers and Fort McMurray in the heart of the Alberta oil sands region starts to rebuild, the economy will bounce back, the bank forecasted.