Bank of Canada cuts rates again as economy contracts

[Gurn]

http://www.msn.com/en-ca/money/topstories/boc-forecast-pushes-feds-to-dollar1b-deficit-pbo/ar-AAdkIax?ocid=AARDHP

" The Bank of Canada's latest economic forecast puts the federal government on track to run a $1-billion deficit in 2015-16, casting doubt on the governing Conservatives' promise to balance the election-year books, says a new analysis by the parliamentary budget office."

"

In its April budget, the Harper government predicted a string of surpluses, starting with $1.4 billion for this election year. The government forecast surpluses of $1.7 billion in 2016-17 and $2.6 billion in 2017-18.

But the budget office projects the government producing a $1-billion shortfall in 2015-16 followed by smaller surpluses of $600 million and $2.2 billion over the next two years.

Their calculations used fresh projections by the Bank of Canada, which last week lowered its outlook for economic growth in 2015 to 1.1 per cent, down from 1.9 per cent earlier this year.

Canada's economy has been struggling, leading some to state it has slipped into recession.

It contracted in the first quarter of the year at an annualized rate of 0.6 per cent — in large part due to the steep drop in oil prices and the failure of other sectors to pick up the slack.

That number registered well below the federal budget's projection that real gross domestic product would grow by 1.2 per cent over the first three months of 2015.

The budget office factored in positive offsets that have appeared since the release of the spring budget: lower interest rates and higher gross domestic product inflation. Their projections also use up the government's $1-billion annual reserve set aside for contingencies."

That $1 billion contingency used to be $3 billion, but last budget the conservatives decreased the size and used the $2 billion to make this budget look better.

[mdehaan]

Not sure how this is a political problem.

Is the Bank of Canada left or right leaning?

How about the Federal Reserve?