Healthy consumer demand should boost economic growth later this year and into 2005, the Bank of Canada said today.

The central bank today released its April Monetary Policy Report, which reviews economic and financial trends in the context of Canada’s inflation-control strategy.

“Even though there are indications of marginally slower growth in the first quarter (of 2004) … economic activity should accelerate in the second half of this year and early 2005,” the bank said.

“Overall, the risks to the outlook appear balanced,” the bank added..

In an optimistic forecast, the bank said low interest rates should encourage domestic consumers to spend, growing world demand for Canadian goods should fuel growth that averages 2.75% this year, rising to 3.75% in 2005.

That’s the same prediction the bank made in January.

But to help meet those targets, the central bank has already cut interest rates three times this year to prod the economy above 1.7% growth rate.

On Tuesday, the bank trimmed its overnight rate to 2%, a level rarely seen since late 1960.

The bank noted that the higher Canadian dollar means rising imports will offset export growth. It said, “The lower value of the U.S. dollar is expected to hold back the growth of Canada’s exports and boost imports.”

Export growth should get a boost from the U.S. economy. The bank projects a 5% growth rate in the U.S. this year, moderating to 4.5% in 2005.

The global economy should grow by 4.3% ethis year, moderating slightly to 4.1% growth in 2005.

Canada’s core inflation rate is forecast to return to the central bank’s 2% target by the end of next year. Currently inflation sits at 1.1%.

The bank said there are still some risks in the global economy, especially those posed by rising oil prices.

“Higher oil prices, should they persist, could dampen growth prospects, especially in the United States,” the bank said.

Economists say that report confirms that the string of interest rate cuts are likely finished, but rate hikes aren’t imminent either.

“The Bank of Canada’s semi-annual Monetary Policy Report should dampen talk that the Bank is poised to suddenly shift into tightening mode,” comments BMO Nesbitt Burns. It notes that the bank said the ” economy is operating significantly below its potential.”

“It seems that it will require a major shock on the growth/inflation front to get them to cut rates again,” says Nesbitt.

TD Bank says, “The key message from our view -­ and from that of financial markets — is that the Bank of Canada is done cutting interest rates.”

Bank of Montreal suggests that the central bank believes it has done enough to stimulate the economy and return inflation to the 2% target, suggesting the bank is not contemplating further rate reductions.