07/13/2016 10:21 EDT | Updated 07/13/2016 10:59 EDT

Canadian Economy Shrank In 2nd Quarter, Bank Of Canada Says

Bank leaves key lending rate unchanged.

OTTAWA -- The Bank of Canada says the impact of the United Kingdom's vote to leave the European Union could trim Canada's gross domestic product by 0.1 per cent over the next two and a half years.

The central bank assessed the impact of the so-called Brexit vote for the first time as it released today a package of downgraded economic projections for Canada.

In a scheduled announcement, governor Stephen Poloz also left the bank's benchmark interest rate locked at its rock-bottom level of 0.5 per cent, as expected.

Stephen Poloz, governor of the Bank of Canada, pauses while speaking during a keynote address at the Canada-US Securities Summit in New York, U.S., on Tuesday, April 26, 2016.(Photo: Victor J. Blue/Bloomberg via Getty Images)

The bank also says the effects of the Alberta wildfire that erupted in May, which shuttered key oilsands facilities and led to Fort McMurray's evacuation, shaved 1.1 percentage points from second quarter growth and forced the economy to contract by one per cent.

However, the bank's quarterly monetary policy report predicts the resumption of oil production and rebuilding efforts in the region will boost third-quarter growth by 1.3 percentage points and help the economy expand by 3.5 per cent.

The bank is also lowering its growth projection for this year to 1.3 per cent from its April estimate of 1.7 per cent, saying weaker investment and export outlooks have more than offset the positive effects of the recent rise in oil prices.

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