Financial Update

Summary:
The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

Full Story:

The global economic recovery is proceeding largely as expected, although risks have increased. As anticipated, private domestic demand in the United States is picking up slowly, while growth in emerging-market economies has begun to ease to a more sustainable, but still robust, pace. In Europe, recent data have been consistent with a modest recovery. At the same time, there is an increased risk that sovereign debt concerns in several countries could trigger renewed strains in global financial markets.

RBC Assistant Chief Economist, Paul Ferley, says “our expectation is that evidence of strengthening growth in both the US and Canada should eventually start to re-emerge and be sufficiently evident by the second quarter of 2011 to prompt a return to tightening mode. With inflation expected to remain moderate and below the Bank of Canada mid-point of its target range, however, it will allow the pace of tightening to remain gradual. From a current 1.00%, we have the overnight rising 100 basis points to finish 2011 at 2.00%.”