edmontonmortgagegroup.com-Conference Board sees 4% bank rate in 2 years

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September 6, 2010

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Conference Board sees 4% bank rate in 2 years

The Conference Board of Canada said Friday (October 16, 2009) it expects the Canadian economy will grow 2.9 per cent in 2010 and the Bank of Canada will raise its target for the bank rate to four per cent by 2011.

The rate is now 0.25 per cent and Bank of Canada governor Mark Carney has committed to keep the rate there until the spring of 2010.

Conference Board predicts the bank rate will reach 4% by 2011. (CBC)

The Ottawa-based think-tank also predicted growth of 3.6 the following year.

The prediction was on the higher end of many forecasts but consistent with what Bank of Canada expects.

The board's analysis concluded Canadian consumers - encouraged by low interest rates - are becoming more confident and willing to spend.

While private business investment will pick up, it said, about $106 billion in profit has disappeared from corporate balance sheets in Canada over the last nine months, and tight cash and lending will hold back a strong recovery in private investment until 2011.

The Board said government stimulus measures worldwide have rescued financial markets and are expected to continue to have an effect into 2010.

The Board concluded the U.S. economy "has hit bottom," and that while the U.S. economy is growing, it will show little strength until 2011 because of low consumer spending and tepid private investment.

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