Bank of Canada keeps key interest rate unchanged at 4.25 pct

The Bank of Canada said it has kept its key lending rate unchanged at 4.25 pct, judging that the risks surrounding its medium-term inflation projection are relatively balanced. It is the third time since July 11 that the central bank has kept the rate unchanged. The bank said the main case for a rise was related to dynamic household spending and a rise in house prices. At the same time, the possibility that the US economy slows more strongly than expected, which would cause a reduction in Canadian exports, would point to a cut in rates. Overall, it said it saw these risks as relatively balanced, so left the rate unchanged. The bank revised down its GDP growth forecast to 2.8 pct for this year from 3.2 pct in its July forecast. It sees growth of 2.5 pct in 2007 and 2.8 pct in 2008. It said that while domestic demand continues to progress at a solid rate, GDP growth in the second and third quarters was weaker than expected due to a fall in exports.