June 13 (UPI) -- Inflation in Canada is running lower than targeted by the country's central bank, though a governor there said the economy has adjusted to lower oil prices.
The Central Bank of Canada reported an inflation rate of around 1.6 percent for April, below its 2 percent target for growth. The nation's economy, which relies in part on exports of fossil fuels, was hit hard by the downturn in crude oil prices last year, though Deputy Gov. Carolyn Wilkins said that phase was in the rear-view mirror.
"The adjustment to lower oil prices is now largely behind us, and we are looking for signs that the sources of growth are broadening across sectors and regions," she said in a speech from Winnipeg.
The impact of lower crude oil prices last year was compounded by wildfires in Alberta, which sidelined about 1 million barrels of crude oil production per day. That came as the oil-rich province was anticipating an $8 billion deficit and lingering recession because of the weakened energy market.
Efforts at diversification have emerged in trade opportunities in the Asian economy, while North American headwinds grew out of the policies from protectionist U.S. President Donald Trump. In April, the administration introduced a 20 percent tariff on soft lumber from Canada, a top commodity.
Dan McTeague, a senior petroleum analyst in Toronto with GasBuddy.com, said the economy is evolving beyond oil and its banking system is "rock solid.
"Canada is dependent on the strength of the U.S. economy and trade, but there are signs of diversification," he told UPI.
With economic leaders in Canada looking for more avenues for diversity, the central bank official said sectors outside energy were able to take up some of the slack that came from lower oil prices.
The government reported first quarter growth of around 3.7 percent for gross domestic product, beating the performance in the U.S. economy, the world's largest. Wilkins cautioned, however, that headwinds remained as crude oil prices hover around $50 per barrel, roughly $10 per barrel lower than two years ago. Investment growth, she said, is likely to be moderate if crude oil prices remain where they are.
"More generally, ongoing uncertainty about the policies of the U.S. administration is weighing on investment plans," she said.