Bank of Canada rate hike view pushed to last quarter of 2014

Thu May 23, 2013 12:26pm EDT
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By Solarina Ho

TORONTO (Reuters) - The Bank of Canada's next interest rate hike won't come until the fourth quarter of 2014, according to a Reuters survey that saw economists push back forecasts for the next tightening due to the economy's tepid growth and low inflation.

All 34 economists polled by Reuters expect the central bank to leave its benchmark rate unchanged at 1 percent on May 29, when it announces its next scheduled rate decision.

"The bank certainly has sent a strong message that they're comfortable with the level of monetary accommodation in the near term," said Derek Burleton, deputy chief economist at Toronto-Dominion Bank, whose rate hike forecast falls on the median fourth quarter of next year.

"Our forecast incorporates some of the bank's medium term view, but keeps the rates stable in the short term, which is consistent with an economy that's struggling to advance."

Canada's inflation rate in April fell to its lowest level since October 2009, making any upward interest rate move even less likely.

Unlike other major central banks that have used ultra-easy monetary policies to stimulate their lackluster economies, Canada's central bank has left interest rates untouched for the longest period since the early 1950s, following three successive hikes in 2010.

Last year, the Bank of Canada said it plans to raise borrowing costs eventually, making it the only Group of Seven central bank with an explicit tightening bias.

It has since toned down the hawkish language, however, as the economy sputtered at the end of last year.   Continued...