Bank of Canada seen on hold until late 2014: Reuters poll

Fri Oct 18, 2013 6:20pm EDT
 
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By Leah Schnurr and Deepti Govind

(Reuters) - The Bank of Canada will likely keep interest rates on hold at low levels for another year and analysts have largely embraced the central bank's new and more open communication strategy, a Reuters poll showed on Friday.

The 34 economists polled unanimously expect the Bank of Canada to keep rates at 1 percent when it makes its next policy decision on Wednesday, given the potential for the U.S. Federal Reserve to maintain its economic stimulus longer than had been expected.

Governor Stephen Poloz will answer questions about the economic outlook when the central bank releases its revised growth forecast at the Oct 23 meeting, and investors will likely try to gauge the fallout from the recent U.S. budget standoff.

The impasse among U.S. lawmakers resulted in a two-week partial government shutdown that could hamper economic growth in the United States, Canada's largest trading partner.

"The risk is increasing towards an early 2015 first hike rather than a mid-2014 first hike, given the unexpected drag from the partial shutdown and potential snowball impacts on decision-making for U.S. households and businesses for the remainder of the year and beyond," said Sebastien Lavoie, assistant chief economist at Laurentian Bank.

Even so, Laurentian is still forecasting the next tightening in the fourth quarter of 2014.

The Bank of Canada was the first Group of Seven central bank to raise interest rates following the 2008-09 recession, though it has held rates at 1 percent since 2010.

Economists were divided over whether the tightening bias introduced by former Bank of Canada Governor Mark Carney was still in effect. Carney, who handed over to Poloz in June, had used language making clear the next interest rate move would be an increase.   Continued...

 
A cyclist rides past the Bank of Canada building in Ottawa July 17, 2012. REUTERS/Chris Wattie