Bank of Canada to Stand on Holding Down Rates

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The Bank of Canada is expected to keep off the interest rates Tuesday, holding them near zero and committing to do so until the middle of 2010, despite the evidence of the economy coming back to life.

Fears of prolonged economic stagnation eased on Friday with a report that showed employers hiring 5 times as many workers as expected.

The data has supported the Bank of Canada’s outlook that economic growth will speed up in the 4th quarter after a disappointing third quarter when the economy crept out of the recession with only 0.4% annualized growth.

All 12 of Canada’s primary securities dealers have forecasted that the central bank will hold its overnight target rate unchanged at 0.25% as its final policy meeting of the year.

The Bank of Canada is expected to release its rate decision and accompanying statement at 9 a.m. Eastern Time.

Two thirds of the traders feel that the bank will follow through on its pledge to hold rates at this level though the middle of 2010, however it is conditional on the fact that inflation stays on track.

I can only see the rate unchanging as the Bank of Canada has kept to its word so far, and there is no reason for them to increase it now.

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