Carney Repeats: Rates Low Till June 2010

Mark-Carney Bank of Canada chief, Mark Carney, repeated his pledge to keep rates low, saying today: 

“Conditional on the outlook for inflation, the Bank expects the policy rate to remain at its current level until the end of the second quarter of 2010…”

That “inflation” caveat means there is a chance rates will rise beforehand, but few are brave enough to predict it.  Nonetheless, Carney stressed that things can change.

Carney also said people shouldn’t get overly excited about an economic recovery just yet.  He noted lots of uncertainty on the horizon, including the Canadian dollar.  It’s virtually unprecedented 2-month rise (see chart) is offsetting much of the government’s economic stimulus.

In conjunction with this news, Canada’s 5-year bond yield promptly bounced off of technical resistance and closed near the day’s lows, at 2.75%.  It will be interesting to see if it can get through the 3% level.  Perhaps we’ll have a respite from rising mortgage rates for a little while.  Or perhaps we’re wishful thinkers.

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Sidebar:  For those unaware, the BoC sets Canada’s overnight target rate, which guides prime rate. That, in turn, influences variable mortgage rates.

Fixed mortgage rates, on the other hand, are driven primarily by bond yields.

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