“Mark Carney oversees his last interest rate decision this morning, but he won’t be making waves. The Bank of Canada was never expected to hike its benchmark rate from its emergency low of 1 per cent. The question is whether it will change the language that accompanies the decision at 10 a.m. ET. The central bank has for some time now indicated that the next move in the overnight rate will be up, not down, no matter how far off that may be,” The Globe and Mail business writer Michael Babad reported today online. Babad’s article continued, “Some observers, however, believe it’s time to drop that signal given such tame inflation, now at just 0.4 per cent, but a still uncertain outlook. That’s not expected to happen, though, in the last decision under Mr. Carney as central bank governor. ‘Given this mix of subdued inflation and strengthening economic growth, we expect the bank to maintain its mild tightening bias especially given that this will be the last meeting before Stephen Poloz takes over as head of the central bank,’ said assistant chief economist Paul Ferley of Royal Bank of Canada. ‘To that end we look for the bank to hold the overnight rate at 1 per cent, and reiterate that rates are likely to stay low for ‘a period of time,’ after which ‘some modest withdrawal of stimulus will likely be required.’ The central bank’s policy statement this morning, added Derek Holt and Dov Zigler of Bank of Nova Scotia, will probably ‘draw a balance’ between caution over such low inflation and optimism over what’s believed to have been stronger-than-expected economic growth in the first quarter of the year. Economists expect a report from Statistics Canada Friday to show that gross domestic product expanded at an annual pace of 2.3 per cent to 2.5 per cent in the first three months of the year. They also don’t expect any change in interest rates until late next year or early 2015. Read the full article here. | Raymond Matt, CFP, CLU, TEP, CHS
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