January 18, 2010

According to Bloomberg, it appears as though the Bank of Canada will keep its benchmark interest rate at a record low on Tuesday and repeat a pledge to leave it unchanged through June.

Meny Grauman, a senior economist at Canadian Imperial Bank of Commerce in Toronto says “They would like to keep that commitment and there’s no reason why they shouldn’t be able to…”

“Carney will probably raise the key rate to 0.75 percent in the third quarter and to 1.5 percent by the end of the year, according economists surveyed by Bloomberg News. A separate survey for the U.S. shows economists don’t expect the Federal Reserve to raise its benchmark rate to 0.75 percent until the fourth quarter.” Bloomberg

The low mortgage rates are behind the December record existing home sales, says the Canadian Real Estate Association. The average five-year mortgage rate was 5.49 percent last week and 5.25 percent in May, the lowest since 1951.

“A 19 percent jump in home prices over the past year hasn’t pushed the inflation rate above the central bank’s target. Consumer prices rose 1 percent in November, Statistics Canada said Dec. 17. The so-called core rate, which excludes gasoline and seven other volatile items, slowed to 1.5 percent.” Bloomberg

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