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Interest Rate Outlook

In the face of slowing growth, muted inflation and lingering global financial instability, the Bank of Canada has held its overnight rate at 1.00% since September. Although the Bank’s medium-term objective of returning rates to normal long-run levels is still intact, the Bank will take a very cautious approach to tightening monetary policy over the next 6 to 12 months. Given that inflation is projected to remain subdued and growth is expected to slow, we do not expect any action from the Bank of Canada until the second quarter of 2011, if not later. Our current forecast is for the Bank of Canada’s target overnight rate to rise from its current level of 1.00% to between 1.75% - 2.00% by the end of 2011.   Click HERE for the full report.

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