Bank of Canada likely to keep overnight rate as is: economists

Mark Carney will have little to consider Wednesday morning, but much to explain, in setting the Bank of Canada’s interest policy for the next little while.

With the global economic landscape teetering, there is little talk in financial markets or at the central bank of interest rate hikes.

The vast majority of economists now are convinced Carney will keep the short-term rate at one per cent for another year.

Analysts said that if there is any change to the policy, it may be to lower the rate rather than raise it by the year’s end, say analysts.

In the United States, the Federal Reserve Board has said it will keep rates at current low levels for at least another two years to try and stimulate the sagging economy.

On Wednesday, the markets are eagerly awaiting the governor’s views about the near future prospects and whether he will signal a possible rate decrease.

In July, the last time Carney pronounced on interest rates, the bank’s statement began with the often-voiced mantra that “the global economic expansion is proceeding broadly as projected.”

That won’t do anymore, says Bank of Montreal economist Douglas Porter.

At the time, Carney had expected the second quarter to show a 1.5 per cent growth rate — anemic perhaps, but far better than the minus 0.4 per cent the economy actually got.

Now the prospect of a second recession, particularly in the U.S., has gained currency, which will have stark implications for Canada in terms of jobs and government budgets.

Scotiabank economist Derek Holt said he doesn’t believe there is sufficient urgency to cut interest rates now, but he says the governor must become more realistic about the economic landscape.