Ottawa, Jul 18 (IANS): A deteriorating global economy prompted Canada's central bank to leave its benchmark interest rate unchanged at one percent Tuesday.

The deceleration in growth for China and other emerging economies "has been greater than anticipated, reflecting past policy tightening and weaker external demand", said the Bank of Canada in a statement announcing its interest-rate policy decision, Xinhua reported.

"While economic expansion in the United States continues at a gradual, but somewhat slower pace, developments in Europe point to a renewed contraction," it added.

The global slowdown has resulted in a significant reduction in commodity prices, although they remain elevated, and global financial conditions have deteriorated since April, said the bank.

It said that although it is believed the European crisis will remain contained, that assumption is subject to "downside risks".

The bank projects that the Canadian economy will grow 2.1 percent this year, 2.3 percent next year and 2.5 percent in 2014, a downgrade from its April projection of a 2.4-percent growth for both 2012 and 2013.

In April, the bank's monetary policy panel also expected Canada's economy to reach full capacity early next year. Now, the target is the second half of 2013.

On Monday, the International Monetary Fund predicted that Canada's economy would grow 2.1 percent in 2012 and 2.2 percent in 2013.

The Bank of Canada expects that consumption and business investments will be the primary drivers of economic growth, which in turn will be affected by the effects of lower commodity prices on Canadian incomes and wealth, along with record-high household debt.