Economists: Rates to Remain on Hold

Bank of Canada Despite robust headline inflation and growing employment, the market expects no rate change when the Bank of Canada meets Tuesday.

A drab North American economy, strong loonie, and European debt concerns will keep rate hikes at bay, according to all 37 economists polled by Reuters. Not one of them expects a rate change until later this year or early 2012.

The overnight rate has now stood at 1.00% for nine months.

Here are some soundbytes about Tuesday’s rate announcement:

“The arguments are there for the Bank of Canada to start hiking rates next week, but we increasingly think that this fall might even be too early given the problems we are seeing in the global economy.” — Jimmie Jean, Desjardins Capital Markets. (Source: CBC News)

“While (the recent) pace of economic growth will be sufficient to get the economy back to full potential by mid-2012, we highly doubt this news will push the Bank of Canada off the sidelines at next week’s fixed rate announcement date…In fact, the Central Bank is likely to stay on hold through the rest of 2011.” — Diana Petramala, TD Economics. (Source: TD research note)

“Even with business confidence on the rise and inflation surpassing the Bank’s prior expectations, the accompanying text may disappoint inflation hawks, in light of unexpectedly soft recent performance stateside and diminished global confidence.” — Peter Buchanan and Emanuella Enenajor (Source: CIBC research note)


Steve Huebl, CMT

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