The prime rate, the basis for variable mortgage rates, is expected to remain at 3%. The key lending rate has remained at 1% for a little more than a year.

The Bank of Canada cited a weakened outlook for the Canadian economy since July, expected slowed growth through 2012, and softer core inflation than expected in making its decision to hold rates.

“Reflecting all these factors, the bank has decided to maintain the target for the overnight rate at 1%,” said press release from the Bank of Canada. “With the target interest rate near historic lows and the financial system functioning well, there is considerable monetary policy stimulus in Canada.”

The bank also lowered its growth forecast of Canada’s economy from 2.6% to 1.9% in 2012. It expected the economy to rebound in 2013 with a growth of 2.9%.

Leslie Preston, an economist with TD Economics, said the Bank of Canada is likely to leave interest rates unchanged until the first quarter of 2013, underscoring the fragility of the economy, and silencing any recent debate about rate cuts.

“All told, today’s statement confirms our view that given the downgraded global growth outlook, and greater economic slack in the Canadian economy than previously expected, interest rates will need to remain accommodative for quite some time,” Preston said.