Bank of Canada likely to keep interest rates unchanged until 2018 - poll

Thu Sep 1, 2016 11:02am EDT
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By Leah Schnurr and Anu Bararia

(Reuters) - The Bank of Canada will likely keep interest rates unchanged for even longer than had been anticipated as a lack of momentum in the economy has prompted analysts to push further their expectations for a hike to 2018, a Reuters poll found.

The central bank is unanimously expected to hold rates at 0.50 percent when it makes its next policy announcement Sept. 7.

According to the median forecast of 35 economists, the central bank is now likely to wait until the first quarter of 2018 before hiking rates to 0.75 percent. It had earlier been forecast in a July poll to raise rates in the final quarter of 2017.

Canada, a major oil exporter, was hit by the slump in crude prices last year and its economy has struggled to sustainably regain momentum since it was in a brief recession in 2015.

Wildfires in northern Alberta dealt another blow to growth this year, leading the economy to shrink in the second quarter at the steepest rate since the global financial crisis.

The Bank of Canada is hopeful that the headwinds Canada faces are temporary and that stronger demand from the United States and a lower Canadian dollar will help revive Canada's export sector.

But until that happens, the central bank is likely to stand pat on monetary policy, economists said.

A separate Reuters poll of foreign exchange strategists on Thursday forecast the Canadian dollar to broadly hold its ground against the U.S. dollar.   Continued...

A man is reflected in a window while walking past the Bank of Canada office in Ottawa, Ontario, Canada, May 25, 2016. REUTERS/Chris Wattie