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Fragility to stay as bank keeps rates at historic lows

December 16th, 2009 Leave a comment Go to comments

OTTAWA–Citing weaker-than-expected growth in the July-to-September period, the Bank of Canada on Tuesday left its overnight rate unchanged at 0.25 per cent.

In the wake of that announcement, TD Bank said Canada’s recovery is so fragile; the central bank’s Governor Mark Carney will have to hold the overnight rate at an all-time low until late next year.

That’s several months longer than Carney has previously said the bank would wait to help stimulate business activity.

TD Bank said current trends indicate a return to full economic output will be delayed until the April-through-June period of 2012, six months later than the central bank is predicting.

“As such, we believe that the Bank of Canada will stay put past its conditional commitment of June 2010, and the first rate hike will not come until the fourth quarter of next year,” said Diana Petramala, a TD Bank economist.

Canada emerged from the recession but only just barely, with growth of 0.4 per cent in the July-through-September period. That was considerably less than the central bank’s 2 per cent growth prediction.

Looking ahead, “the main risks are a more protracted global recovery and persistent strength in the Canadian dollar that could act as a significant further drag on growth,” Carney stated.

The next scheduled date for announcing the bank’s overnight rate target is Jan.19.

For more information on bank rates please contact Charmaine

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