31 May 2011
• “The economic growth in Canada is proceeding almost as expected…”
• “The financial conditions remain quite stimulative.”
• “Some of today’s monetary policy stimulus, implemented in order to support the economic growth and deal with excess supply, will be withdrawn in time.”
• “High commodity prices and excess demand conditions in major emerging-market economies cause broader global inflationary pressures.”
• “The total CPI inflation will remain above 3% in the short term. The core inflation may reach the level of 2% by the middle of 2012.”
The next interest rate meeting will be on July 19, but many economists still expect no rate hikes until at least September.
In addition to it, the financial markets’ forecasts are even more optimistic. According to the overnight index swaps (OIS), which track the central bank’s rate expectations, the next increase may happen in February 2012. But it should be noted that in March the OIS market expected a July hike, so these forecasts can’t be used as a guide for actions.
CIBC economist, Benjamin Tal, said the OIS market is not the best indicator, because it can change often.
In his opinion, the “normal” Bank of Canada policy rate is 3-3.5%. “The only question,” – he said, – “is when we are going to reach it: in 2012 or 2013. I think 2013 is more likely”.