Posted by: Daryl & Wendy Ashby | August 18, 2011

Rates Holding

What a difference a few weeks makes.

It was only a month ago, on the heels of the Bank of Canada’s last interest rate announcement made in July, that many had predicted a rate hike was all but certain in the fall.  In fact, many even pointed to Mark Carney himself suggesting a rate hike in the form of the language he used during the rate announcement as a signal of things to come.

Now, a few short weeks, later there has been major global financial turmoil in the form of renewed European debt crisis and US debt downgrading, and a major roller coaster ride on the international markets. The end result is we are in much the same place we were before. 

Many, including BMO, TD, Scotia Bank and RBC, are modifying their rate forecasts to suggest that rates will hold through to 2012 to Q2 at least.

Mixed economic data, excessive volatile movement in the markets, and global uncertainty that has reached new heights have all contributed to an economic malaise, and has economists circling their wagons.

To further support this notion, the US Federal Reserve took the unprecedented move of announcing an extended hold on rates, pledging to keep them low for at least the next couple of years in an effort to keep the economic machinery grinding in the country.

While many economists in this country expect rates to hold, very few expect rates to drop though so it is likely going to be a case of status quo in the foreseeable future.

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