Bank of Canada Leaves Rate Unchanged
The Bank of Canada announced today that they are leaving the overnight rate
unchanged. They also indicated that they will conditionally keep their
plan to leave rates unchanged until the 2nd quarter of 2010. The bond
market thought that the Bank of Canada would go back on their word to
leave rates alone after Australia and Israel raised their overnight rates, and
after strong employment data. However, the strong Canadian dollar is
hindering the recovery. The Bank of Canada has now pushed back
their forecast that the output gap will close in the last quarter of 2011.The prime rate could remain unchanged until that time.
The mortgage rates did rise last week after a massive sell off in the bond market, as the bond market was expecting the Bank of Canada to increase its overnight rate early after the employment figures came out much stronger than expected. We will be watching the bond market to see how it reacts to this news.