Reuters Poll: Expected timing for Bank of Canada rate hike pushed back

Wed Nov 26, 2014 9:25am EST
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By Anu Bararia

(Reuters) - The Bank of Canada will likely defer an interest rate hike until late next year despite high household debt and above-target inflation, a Reuters poll showed on Wednesday.

The central bank will stay put at next week's policy decision, according to the poll of 41 economists, leaving its key interest rate on hold until the fourth quarter of 2015, slightly later than forecast in a Reuters poll in October.

Recent comments from BOC Governor Stephen Poloz and his officials on how close to capacity the Canadian economy was operating triggered some of the forecast changes.

"They've been arguing that the amount of excess slack in the economy has been understated thus far, and if that's what they believe, then that would argue for a later tightening," said Andrew Kelvin, senior fixed-income strategist at TD Securities.

Kelvin also pointed to disappointing growth in the third quarter and to low oil prices.

The latest poll results come alongside wavering expectations that the U.S. Federal Reserve will raise its key interest rate from a record low by the middle of next year and perhaps instead wait until later in the year.

Once the Bank of Canada does start hiking rates, the poll forecast follow-up quarter-point hikes in each of the first two quarters of 2016.

Canada's headline and core inflation rates overshot the Bank's 2 percent target in October, at 2.4 percent and 2.3 percent respectively, while unemployment rate dropped to a six-year low of 6.5 percent.   Continued...

The Bank of Canada building is pictured in Ottawa March 3, 2009.  REUTERS/Chris Wattie