Interest rates should stay ‘very low’ through 2011: CIBC World Markets

The Canadian Press 

April 09, 2010 5:04 a.m.


TORONTO – A new report from CIBC World Markets says that Canada’s interest rates should remain “very low” by historical standards through 2011, even if the Bank of Canada raises rates this summer.

The report suggests that overnight rates will likely hold at around 1.25 per cent until the end of this year, and probably won’t go any higher than 2.5 per cent by the end of 2011.

Avery Shenfeld, the bank’s chief economist, says rates could also remain low in order to stimulate the economy, as both federal and provincial governments tighten spending in 2011 and potentially raise taxes.

He added that the Bank of Canada would take several other factors into account, including that domestic production is still below its potential.

Shenfeld said the central bank will likely also exercise restraint because of a sluggish recovery south of the border, and the likelihood that the U.S. Federal Reserve will not raise rates for several quarters.

The Bank of Canada is widely expected to begin hiking its key interest rates in late June or July after keeping them at historic lows for more than a year.