deteriorating European economy and weak global growth will keep the Bank of Canada from raising rates for at least another year, though an interest rate cut looks highly unlikely, according to a Reuters survey.
The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada’s target for the overnight rate — its main policy rate — has been at 1% for more than a year.
“The longer we spend struggling with slower growth and the longer we go without the Europeans coming to some cohesive policy solution, the worse the economic drag will be,” said David Tulk, chief Canada macro strategist at TD Securities.
“You get the sense that growth I think is likely to remain lower for longer, just like interest rates.”
Investors in the first quarter of 2012 are expected to focus on the heavy supply of eurozone debt coming due, with fears about a possible lack of demand at auctions. Italian and Spanish bond sales in particular are viewed as the next big tests.
Some Canadian economic data has also been worrisome. A Bank of Canada business survey on Monday showed an increasing number of firms are pessimistic about the rate of sales growth, further reducing pressure for the central bank to take interest rates higher.
The Reuters poll of 41 economists and strategists released on Tuesday showed the median forecast for the next interest rate hike was pushed back by three months to the first quarter of 2013 from the fourth quarter of 2012 projected in a November poll. The Bank of Canada’s target for the overnight rate — its main policy rate — has been at 1% for more than a year.
“The longer we spend struggling with slower growth and the longer we go without the Europeans coming to some cohesive policy solution, the worse the economic drag will be,” said David Tulk, chief Canada macro strategist at TD Securities.
“You get the sense that growth I think is likely to remain lower for longer, just like interest rates.”
Investors in the first quarter of 2012 are expected to focus on the heavy supply of eurozone debt coming due, with fears about a possible lack of demand at auctions. Italian and Spanish bond sales in particular are viewed as the next big tests.
Some Canadian economic data has also been worrisome. A Bank of Canada business survey on Monday showed an increasing number of firms are pessimistic about the rate of sales growth, further reducing pressure for the central bank to take interest rates higher.
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