OECD slashes Canada’s growth outlook, sees lower rates globally amid oil pain

OTTAWA – The Organization for Economic Corporation and Development is cutting its growth outlook for Canada this year and next, but acknowledging plunging oil prices will lead to lower interest rates – as they already have in this country.

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\”Overall, the near-term outlook remains for moderate, rather than rapid, world GDP growth. [But] real investment remains sluggish and labour is not yet fully engaged,\” the OECD said in its interim economic assessment released Wednesday.

\”Lower oil prices will boost global demand and also have created conditions for many central banks to reduce interest rates.\”

The Bank of Canada has made that move, something the Paris-based OECD did not anticipate in its November economic outlook.

In fact, the 34-member economic policy group predicted policymakers in this country would \”gradually\” begin raising its key interest rate \”around mid-2015.\”

Instead, central bank governor Stephen Poloz did the alternative in January, lowering the trendsetting lending level to 0.75% from level 1%, where it had been idling since September 2010.

Now, the OECD appears to be endorsing Canada\’s lower-rate policy.

\”Tailwinds from lower oil prices and the effects of monetary policy easing are driving the overall improvement within the outlook,\” the report said.

\”Lower oil prices both raise the real incomes of households and reduce costs for firms, and should therefore benefit you for global growth, notwithstanding losing real income for oil producers,\” it said.

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