Sept. 10 (Bloomberg) -- The Bank of Canada kept its key interest rate at a record low and said persistent strength in the country’s dollar is threatening signs of faster-than- expected growth in the second half of the year. The target rate for overnight loans between commercial banks remained at 0.25 percent, a move predicted by all 21 economists surveyed by Bloomberg News. Governor Mark Carney repeated a commitment made in April to keep that rate unchanged through June 2010 unless the inflation outlook shifts. “Growth in the second half of 2009 could be stronger than the Bank projected in July,” the central bank said today in a statement from Ottawa. “Persistent strength in the Canadian dollar remains a risk to growth and to the return of inflation to target.” The currency has gained 13 percent this year, straining an economy that is showing signs of recovering from Canada’s first recession since 1992. Companies such as Bombardier Inc. are cutting spending because they haven’t seen the effects of economic recovery. The Canadian dollar weakened 0.4 percent to C$1.0827 per U.S. dollar at 9:13 a.m. in Toronto, from C$1.0785 yesterday. In July, the Bank of Canada said the economy would grow at a 1.3 percent annualized pace this quarter, ending a recession that began at the end of last year, and forecast fourth-quarter growth of 3 percent. The economy is being supported by “stimulative” monetary and fiscal policy, improved financial markets, higher commodity prices and improved business and consumer confidence, the central bank said today. Currency Assumption The central bank’s July forecast also assumed Canada’s dollar will average 87 U.S. cents through 2011. The currency traded at 92.37 cents this morning. The stronger currency makes exports less competitive. Canada recorded its first quarterly deficit in traded goods since 1976 between April and June, a gap of C$1.71 billion compared with a C$16.2 billion surplus in the year-earlier period. “We have to operate our business prudently, make sure that we cut back on our costs in the recession,” Pierre Beaudoin, chief executive officer of Bombardier Inc. said on a Sept. 2 earnings call. The Montreal-based company, the world’s third- biggest plane maker, plans to eliminate 1,200 positions in the next few months, leaving its workforce at about 4,360 people. The central bank reiterated today it has “considerable flexibility” with monetary policy, even with the benchmark lending rate at the lowest since the central bank was founded in 1934. Policy makers announced no change today in its three emergency lending programs, after scaling them back in July as credit conditions improved. Policy makers also said that Canada’s inflation and economic growth “evolved largely as expected” in the first half, and repeated that consumer price inflation will remain below the bank’s 2 percent target until the second quarter of 2011. The bank’s commentary may influence debate when the country’s Parliament resumes Sept. 14. Liberal Leader Michael Ignatieff said last week he will try to force Prime Minister Stephen Harper’s Conservative Party government into early elections. Ignatieff has said Harper has mismanaged the economy and exacerbated the recession.

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