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Gabriella Makar, MBA
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14717 40 AV, Edmonton, Alberta
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Thursday, March 3, 2011 - Variable Rate Loans Remain Bargain Bin Cheap

Keeping in line with the expectations of the market, Canada’s central bank left interest rates unchanged for the fourth consecutive time this morning.


The Bank of Canada (BOC) left the Canadian overnight interest rate, which is the rate that banks use to lend money to each other in the overnight market, at 1.0% this morning. As a result the prime rate, which is used to set variable rate mortgages and many other consumer and business loan products, remains at 3.0%.


In a press release that is being interpreted as slightly more dovish than expected by the market, the bank continued to state that globally the recovery is proceeding largely as expected, but that “risks remain elevated”.


With regards to Canada, the bank stated that “the recovery is proceeding slightly faster than expected” but that the high
value of the Canadian dollar and poor productivity continue to be headwinds. On the inflation front things also appear to be under control: “inflation in Canada has been consistent with the Bank's expectations” and that “underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy”.


It appears from this press release that the BOC has been impressed with the resilience of the Canadian economy although they are still unconvinced the global economy is on the straight and narrow. Looking ahead, the market is pricing in a roughly 50% chance of a rate hike at the next meeting on April 12th, although with all the tension going on outside of Canada, a lot of uncertainly about the timing of future rate increases remains.*

*courtesy of Dan Sumner, Economist, ATB Financial

posted in General at Thu, 03 Mar 2011 20:16:17 +0000



Data last Updated: 2020-09-21 at 03:04:21 GMT America/Edmonton
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