Bank of Canada seen on hold rates until Q4, 2012: Reuters poll

Wed Nov 30, 2011 11:50am EST
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By Claire Sibonney

TORONTO (Reuters) - The Bank of Canada will not raise interest rates again until the fourth quarter of next year as Europe's worsening debt crisis dims the outlook for the global economy, according to a Reuters survey.

The Reuters poll of 40 economists and strategists released on Wednesday showed the median forecast for the next interest rate increase was pushed back by three months to the fourth quarter from the third quarter of 2012 projected in an October poll.

The median view was still stronger than that of many primary dealers calling for the next move in 2013, closer to the timeline of the U.S. Federal Reserve.

"Even though there is so much uncertainty in the global economy at the moment, Canada's economy we think still remains in relatively good stead," said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.

"In an environment where our economy is growing at a decent clip, not over the top but at a decent clip, the U.S. economy is back on its feet ... some of the external risks that are concerning the bank right now will abate and they will be in position to start to very, very, very gradually remove some of the stimulus."

Data on Wednesday showed a stronger-than-expected third quarter rebound in domestic growth after a fall in the second quarter.

But overall, Canadian economic data has been mixed - including a shocking jobs loss last month - and analysts are still focused on macro events to set direction for monetary policy.

Two years into Europe's sovereign debt crisis, investors are fleeing the euro zone bond market, European banks are dumping government debt, deposits are draining from south European banks and a looming recession is aggravating the pain, fueling doubts about the survival of the single currency.   Continued...