21 april 2010

Here’s what analysts say about the Bank of Canada announcement:
•    “Removing the conditional commitment … can be a sign of a June 1 hike…The question is whether 25 basis points or 50 basis points is likely”, – VP of economics, Derek Holt, Scotia Capital (Montreal Gazette).
•    “We expect gradual 25-basis-point increases at each of the next five Bank of Canada fixed rate announcements”, – Diana Petramala, TD economist (Globe & Mail).
•    “This statement reflects serious change in tone by the bank. Moreover, it doesn’t rule out the possible 50 basis point moves”, – deputy chief economist, Douglas Porter, BMO Capital Markets (CTV).
•    “A moderate growth track can allow the BoC to stick with only 25 bp moves and to take a break on rate hikes after October”, – Avery Shenfeld, CIBC chief economist (Vancouver Sun).
The analysts, polled by Reuters, also predict a 100 to 175 bp jump in the overnight rate by the end of the year. That suggests a 3.25% to 4.00% prime rate by New Years. (Compare: today the prime rate is 2.25%).

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