Economic analysis

Harper plays down significance of Bank of Canada interest rate cut

Harper emphasizes economy is still expected to grow, albeit much slower

ST. CATHARINES, Ont. – Prime Minister Stephen Harper is playing down the significance of the Bank of Canada’s surprise interest rate cut, saying his government is sticking with its plan to introduce tax cuts and balance the books.

Harper made the remarks during a visit Thursday to a custom picture frame company, where he announced enhancements to the Canada Small Business Financing Program.

On Wednesday, the bank shocked the financial and political world when it announced a quarter of a percentage point drop in the trendsetting interest rate.

The bank linked the decision to the plummeting price of oil, which it said “will weigh significantly on the Canadian economy.”

Opposition leaders seized on the announcement to suggest the Conservative government has bungled its economic policy, particularly by earmarking billions for measures like income splitting for families with children.

Harper emphasized that the economy is still expected to grow, albeit much slower. The Bank of Canada predicted growth would slow to 1.5 per cent in the first half of the year, and gradually pick up steam.

He dismissed the suggestion that his government might change course in view of the price of oil, and said he remains committed to balancing the books.

“Keeping our taxes low and having sound public finances — this is the formula that has made the Canadian economy one of the most stable and solid in the world,” Harper said.

“It’s the formula that’s given us 1.2 million net new jobs in a time of incredible volatility. So we’re going to continue on that general course.”

The changes to the small business program will allow companies with gross annual revenue of $10 million or less — up from $5 million — to apply. They can borrow up to $500,000 each.

The changes will allow entrepreneurs to borrow money to buy or improve land or buildings.

Harper and the other federal leaders have been spending much of their time of late in southwestern Ontario, an area that will be key in deciding who forms the next government.

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