All eyes in the mortgage industry will fixate on the Bank of Canada (BoC) tomorrow.
People are eager to see if the Bank’s interest rate statement will yield any potential clues on the direction of rates.
As most now know, the BoC conditionally committed to keep rates flat until Q3 next year. After that, anything goes. In September, BoC governor, David Longworth, said, “One would expect there would be some movement up in interest rates following the end of June 2010.”
Since Longworth made that statement, there’s been more talk in the media about rates going up sooner. That’s due to recent hints of economic strength.
So far, however, inflation (the main rate hike catalyst) is nowhere to be seen. As a result, 23 of 23 major economists surveyed by Bloomberg expect no change by the BoC on Tuesday.
When rates finally do begin their ascent, the magnitude of the increases will depend on how fast the economy roars back. Some economists think the BoC will have its hands full next year. On Friday, for example, the Conference Board said it expects the Bank of Canada to lift rates 3.75% by 2011. (CBC) That’s one of the most aggressive rate hike forecasts so far.
At the moment, most economists’ predictions seem to be for a 2.0-2.5% eventual increase. But few expect any imminent action. Eight of 12 primary bond dealers polled by Reuters believe the Bank will not raise rates until late 2010. (Reuters)