Bank of Canada will cut interest rate again, TD Bank predicts

The Bank of Canada willcut its key interestrate again in March, TD Bank predicts in anupdate to its 2015 forecast.

Last week, the Bank of Canadacut its target for the overnight lendingrate from an already low oneper cent to0.75 per cent, in light of the risk posed to the Canadian economy byslumping oil prices.

Economists had expected to hold the rate at one per cent, whereit had been since September 2010, but governor Stephen Poloz saidlow oil prices were "unambiguously negative" for the Canadianeconomy as he announced the rate cut.

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In an update released Monday, TD forecastthat the downward trendwill lead the Bank of Canada to cut the overnight rate by another 25 basis points to .5 per cent, beforestanding patuntil the second half of 2016.

TD has also revised its economic outlook because of oil prices, which are trading at about $45 US a barrel. TD predicts they could temporarily drop below $40.

"As a consequence, we have trimmed our outlookfor real GDP growth for 2015 to two per cent, down from 2.3 per centin our latest forecast in December," the report said.

The bank predicts the U.S. benchmark price will average $47this year and $65 in 2016, down from its December forecast of$68 in 2015 and $80 next year.

$875 in savings at the pumps

TD said that while consumers will get relief at the pumps, averaging a savings of $875 a family in 2015, that will be far outweighed by lower corporate profits and weaker income growth.

"Lower corporate profits will likely lead to a contraction inbusiness investment and weaker employment growth relative to ourDecember forecast," the TD report said.

The unemployment rate will rise to 6.9 per cent by the end of the year, and stand at 6.7 per cent at the end of next year, TD forecasts.

The Canadian dollar also stands to drop further as low as75 cents US in early 2016.

Alberta, Saskatchewan and Newfoundland and Labrador will bear the brunt of the downward trend, while Ontario, B.C., Manitoba and NovaScotiaall stand to benefit, the report said.