Bank of Canada holds at 1% rate

The Bank of Canada left its central rate at 1 percent Tuesday in a bid to offset inflationary gains and with a cautious eye on Europe's financial crisis. While some economists had anticipated a slight increase in borrowing costs for Canadians with a rate increase, the bank said in a statement from Ottawa global economic conditions have weakened in recent weeks. "Some of the risks around the European crisis are materializing and risks remain skewed to the downside," the statement said. "This is leading to a sharp deterioration in global financial conditions." The bank said while Canadian economic growth had been "slightly slower than expected in the first quarter," it also noted "business and household confidence has held up and domestic financial conditions remain very stimulative." The report also said the persistent strength of the Canadian dollar, or loonie, was expected to downwardly affect the declining value of net exports because of "modest" demand. The loonie has been at or above par with the U.S. dollar for most of the past few months.