Bank of Canada holds 1 percent rate

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OTTAWA, July 17 (UPI) -- Diminished global economic prospects led the Bank of Canada to announce it was holding its central borrowing rate to 1 percent Tuesday.

In a release from Ottawa, the central bank said its protective cautiousness was based on economic conditions in the United States and Europe.

"While the economic expansion in the United States continues at a gradual but somewhat slower pace, developments in Europe point to a renewed contraction," the bank said. "This slowdown in global activity has led to a sizeable reduction in commodity prices, although they remain elevated."

This year, Canada has seen an expansion of its global trade deficit as exports shrink and imports rise while the Canadian dollar hovers near par with its U.S. counterpart.

The central bank said there was concern over "record-high household debt" as part of the decision not to increase interest rates.

Despite the concern, federal economists predicted better times.

"The bank projects that the economy will grow by 2.1 percent in 2012, 2.3 percent in 2013 and 2.5 percent in 2014," the release said.