OTTAWA - Bank of Canada Governor Mark Carney says the Canadian economy is being squeezed by a global slowdown, and opted Tuesday to keep the benchmark overnight interest rate unchanged at 1%.

Carney also tweaked growth projections downward over the next two years, saying "global headwinds are restraining Canadian economic activity."

Europe and the financial crisis battering the region, as well as a greater-than-anticipated deceleration in growth in China and other emerging economies are pushing commodity prices down as demand shrinks. A sluggish U.S. economy isn't helping matters.

Record-high household debt, waning housing activity from record levels and a strong loonie are contributing to the slower pace, the Bank says. New mortgage rules that kicked in this month are expected to further cool the housing boom.

Growth is forecast at 2.1% this year, 2.3% in 2013 and 2.5% in 2014.

Consumption and business investment are expected to be the key drivers of the Canadian economy, largely because of attractive interest rates.

The Bank's rate has remained steady for nearly two years and is used by banks and other lenders to set their own interest rates.

Inflation is expected to hover around 2% or lower over the next year.