Economy slowing: Bank of Canada

Canada's economy is slowing markedly from the initial burst out of recession, the Bank of Canada said Thursday.

In its latest Monetary Policy Report, Canada's central bank highlighted growing risks to the country's rebounding economy.

"The global economic recovery is proceeding but is not yet self-sustaining," the bank said.

It now says this year's second-quarter growth will be less than half what it was in the first quarter, and will fall further in the third quarter of 2010 to 2.8 per cent.

Meanwhile, the bank says the European crisis is affecting Canada's economy and will shave 0.1 percentage points off the gross domestic product this year, 0.3 points in 2011 and 0.2 points in 2012.

For 2010, the bank is expecting 3.5 per cent GDP growth, slowing to 2.9 in 2011 and 2.2 in 2012.

On Tuesday, the bank elected to raise its benchmark overnight lending rate by 25 basis points to 0.75 per cent, the second consecutive hike after the rate sat at an emergency low of effectively zero since April 2009.

The bank also downgraded its working assumption for the Canadian dollar to 96.4 cents US, down from 99 cents US in the last report in April.