Bank of Canada seen holding steady on interest rates
Last Updated: Monday, April 23, 2007 | 3:02 PM ET
CBC News
Interest rates are expected to remain unchanged when the Bank of Canada releases its rate decision Tuesday morning.
All economists polled by Reuters and Bloomberg don't expect the central bank to budge. The current overnight rate — what banks charge each other for overnight loans — stands at 4.25 per cent.
The rate has not moved since May 24, 2006, when the Bank of Canada raised it by one-quarter of a percentage point. Since then, the rate has remained stable through six rate decisions.
If the rate remains unchanged Tuesday, it will mark the longest period on hold since the Bank of Canada started explicitly targeting the overnight rate in the mid-1990s, according to TD Securities chief economics strategist Marc Lévesque.
With the rate expected to remain fixed, the chief focus will be on the language the central bank employs in its commentary accompanying the decision.
"Our view is that the bank will maintain its assessment that the risks to the outlook are balanced," Lévesque said in a recent commentary. "But at the same time, it will probably indicate that both the upside and downside risks have increased.
"However, there is no doubt that the bank is keeping a close eye on the inflation backdrop, and, consequently, this is one case where the outcome is not a slam dunk," he said.
Tuesday's rate decision will be followed on Thursday with the semi-annual monetary policy report and a press conference with Bank of Canada governor David Dodge.
Looking farther ahead, some economists don't think the central bank will hike rates at all this year, but see an increase next year.
"We continue to lean to the view that the next move will be a hike — recent core [consumer price index] trends, the persistent strength in global growth and commodity markets and robust domestic housing markets are expected to outweigh the latest upswing in the [Canadian dollar]," BMO Capital Markets deputy chief economist Douglas Porter said.
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