The Bank of Canada (BoC) held their benchmark interest rate on September 3 at 3.0%. This was in line with the expectations of most economists from the major banks. As in their previous communique, the Bank cited three main developments affecting the Canadian economy: (1) economic weakness in the US; (2) on going turbulence in the Global Financial markets and (3) a sharp increase in commodity prices. From the Bank’s point of view, the US economic weakness and the turbulence in the financial markets are progressing as expected. The sharp increase in commodity prices, however, has not materialized due to slower global demand.
Our roundup of the Big 5 Bank’s economic forecasts show that economists at these institutions are expecting rates to stay the same until 2009. Note: There are only 4 banks in our report since Scotia Bank did not release their interest rate forecast this month.
Here is what they are saying:
- TD Economics - “..we feel that the next move by the BoC will be a rate hike – but not until the second half of 2009″ –TD Economics The Weekly Bottom Line September 5, 2008
- BMO Nesbitt Burns – Forecast shows the overnight rate holding steady until Sept 2009 (see Forecast Summary on page 1) — BMO Rate Scenario dated September 3, 2008
- RBC – The bank is looking at a rate hike “..a rate hike by the Bank of Canada likely in the first quarter of 2009.”– RBC Financial Market Update dated Aug 6, 2008
- CIBC Wood Gundy – “We continue to expect the next move will be a hike in 2009″ — CIBC Market Call dated August 29, 2008
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