Bank of Canada could slash interest rates next year

Sheryl King, an economist at Bank of America Merril Lynch, said in a note that the volatility hitting Europe and the risk of damage to the global economy means the Bank of Canada will move to cut its benchmark interest rate to ward off the risk of recession.

With the Eurozone sovereign debt and banking crisis showing no sign of containment, some economists think the Bank of Canada will cut rates back to the effective lower bound of 25 basis points (0.25%) early next year.

Click here to read the full article in the Financial Post.

Bank of Canada holds rate at 1% as outlook worsens

The Bank of Canada has kept it's target for the overnight rate steady at 1%. This means that the Bank of Canada prime rate remains at 3%.

The BoC sited a worsening global economy and the need to maintain the current level of stimulus. The Bank also hinted that they may have to keep the benchmark interest rate this low for an extended period of time which is a surprise to many, as we had been expecting a rate hike sooner than later.

The Bank of Canada said that the risk to Canada's economy were roughly balanced, therefore no need for a change to the rate was required at this point.

Debt troubles in Europe continue to have an effect as does the slow down in the USA and emerging markets and Canada's export-driven economy is heavily dependent on all these markets for growth.

It was the 9th consecutive time that the Bank of Canada has decided to hold the rate at 1%.

"Our base case remains that the Bank of Canada will keep rates unchanged until the start of 2013", says BMO economist Michael Gregory. "If anything, today's announcement increases our convictions."

To read the full article from CBC click here.

No rate hikes till Summer of 2012: Reuters poll

The forecast for the next Bank of Canada interest rate hike was pushed back to the 3rd quarter of 2012 based on a recent Reuters poll of 40 economists and strategist in August 2011. This was based on slow global growth and the risk that Europe's debt crisis will linger on, according to the Reuters survey released on Tuesday.

Analysts said Canada's central bank need to raise borrowing costs less than they previously thought, because the domestic economy has not recovered as strongly as expected and the European debt crisis still is dampening the global outlook.

The poll showed a 95 percent probability there won't be a change in rates at the next policy announcement on October 25.

Click here to read the complete article from Reuters.

Carney Confident Canada can survive Economic Crisis

Bank of Canada Governor Mark Carney delivered an assuring message to Canadians yesterday. In that message he stated that he expects the strength of Canadian financial structures to carry it through the growing international crisis.

He also stated that even if other country's fell back in to a recession Canada's economy would remain in tact. This is due to the fundamental strength of Canada's banking system, which was named the best banking system in the world for the 4th consecutive year.

That being said, expect the Bank of Canada to hold interest rates until they can see some stability in the work economy.

Click here to read the complete article from CTV.ca

Bank of Canada keeps overnight rate at 1 percent

The Bank of Canada has done a 180 shift and held the bank rate at 1% (3% prime rate). Earlier this year is was a forgone conclusion that the BoC was going to start to raise rates this fall.

Several factors have forced the banks hand, such as the global economic outlook has deteriorated in recent weeks. The European debt crisis has intensified, along with the US downgrade of credit from AAA to AA, plus the US recession was deeper and has been shallower than previously reported. Recent data also concludes that the US growth recovery will be weaker than anticipated.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. In light of slowing global economic momentum and heightened financial uncertainty

The next BoC update is October 25, 2011.

Click here to read the entire article from the Bank of Canada.

Home buyers worried about being pushed out of the market by higher mortgage rates received a little good news this week.

With all the turmoil in the world financial markets in the last two weeks, the pressure has been taken off banks to raise interest rates. The longer the turmoil, the more likely the mortgage rates are to fall and the Bank of Canada will be pressured to lower the overnight rate. 180% switch from discussion of a pending rate increase in the fall.

The Bank of Canada has not raised it's overnight rate in 2011, making interest rates among the lowest in Canadian history.

This is a benefit to first-time buyers and anyone who is looking to renew their mortgage because lower rates reduce the cost of borrowing.

Read more at:

http://www.vancouversun.com/business/Interest+rates+calm+turbulent+times/5239589/story.html#ixzz1UkFKHx1v

Bank of Canada Maintains Rate Target at 1%

The Bank of Canada this week announced that it is maintaining its target for the overnight rate at 1%. The bank prime lending rate remains at 3%.

The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household spending and a slow growth in employment. While growth in Europe has been stronger than expected, fiscal cuts in many countries reflect a weaker growth than originally anticipated. Widespread concerns over sovereign debt have increased risk aversion and volatility in financial markets.

In Canada, the economic expansion is proceeding as projected, although the expected rotation of demand is somewhat slower than had been anticipated. Household spending remains solid and business investment vigorous. Net exports remain weak, due to modest U.S. demand and ongoing competitiveness challenges, particularly the persistent strength of the Canadian dollar. Despite increased global risk aversion, financial conditions in Canada remain very active and private credit growth is strong.

The bank expects growth in Canada to re-accelerate in the second half of 2011. Over the projection horizon, business investment is expected to remain strong, household spending to grow more in line with disposable income, and net exports to become more supportive of growth. Relative to the April projection, growth in household spending is now projected to be slightly firmer, reflecting higher household income, and net exports to be slightly weaker, reflecting more subdued U.S. activity. This was the 10th consecutive month that there was no change to prime rate. The Bank of Canada did hint that there may be rate increases on the horizon as the Canadian economy grows closer to full capacity.