Due to the uncertainty of the speed of the economic recovery in Europe and its potential spillover effect in to Canada, The Bank of Canada plans to delay any rate hikes until September 2011. Initially the BoC had planned to start to raise interest rates as early as this July.
Dawn Desjardins, assistant chief economist with RBC states “combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought. Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”
So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.
Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.
Click here to read the complete article from Eric Lam of the Financial Post.
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