The Bank of Canada announced this morning that there would be no change in the overnight lending rate and thus no change in the prime lending rate of all major banks. HOWEVER, it was surprised by the fact that the Canadian economy grew by 5% in the fourth quarter of 2009. This figure was much higher than expected and a result of “vigorous domestic spending”. In addition, it implied that if such spending continues and inflation exceeds their 2% target, that rate increases may have to come sooner rather than later. That being said, it did re-iterate its conditional promise to keep the overnight lending rate as is, until the end of the second quarter (June). I don’t expect any rate increases until late summer at the earliest.
Kevin Flaherty
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