AKIPRESS.COM - The Bank of Canada said Wednesday that the wildfires that razed parts of Fort McMurray, Alberta, and forced the shutdown of several oilsands operations will exact a toll on the economy, but noted that it would be temporary as it kept its key interest rate on hold.

The central bank said that its preliminary assessment – its first since the disaster erupted earlier this month – suggests the fires will cut 1.25 percentage points off real GDP growth in the second quarter.

In its April monetary policy report, the bank had predicted growth at an annual rate of 1 percent for the second quarter.

“While we don’t know the bank’s updated tracking excluding the wildfires, it’s likely that the bank is tracking a contraction for the second quarter,” TD Bank senior economist Leslie Preston said.

The Bank of Canada is expected to update its full outlook for the economy and inflation in its next monetary policy report on July 13, when it also makes its next rate announcement.

Despite the cut to its expectations for growth in the second quarter, the Bank of Canada kept its key interest rate at 0.5 percent. The rate is a major factor used by Canada’s big banks in determining their prime lending rates.

The central bank noted that growth in the first quarter was in line with expectations and the economy is expected to rebound in the third quarter as oil production resumes and reconstruction of the areas devastated by the fire begins.

The downgrade of the second quarter follows similar moves by economists at some of Canada’s big banks.