Interest Rate Predictions ~ February 2010
By Brian Madigan LL.B.
Naturally, no one can be sure of what will happen to interest rates, but the economists are making some educated guesses.
The Bank of Canada overnight rate sits at 0.25%. That is a trend setting rate and the lowest it has been in 50 years. One thing for sure, it’s not going down any further. So, the real question is how soon is it going up, how fast and how high?
Economists predict somewhat higher interest rates in the fall. Mark Carney the Governor of the Bank of Canada has promised to hold the interest rate firm until the first of July 2010. After that, who knows!
Here are some quotes from the Canadian chartered banks. Hopefully, they are a little more in the know than the rest of us:
TD Quarterly Economic forecast
…..an expected rise in short term interest rates of a full 3 percentage points by the end of 2011 is likely…
RBC Economics
In the near-term, with interest rates likely to remain low….The Bank of Canada will honour its conditional commitment to hold the policy rate at its current level until the end of the second-quarter 2010.
Our baseline forecast looks for the Bank to raise the policy rate by 100 basis points in the second-half 2010. Another 225 basis points in rate hikes are expected over 2011 with the policy rate expected to settle at 3.5%.
Scotia Economics
Overall, we expect that the Fed and the Bank of Canada will raise their overnight rates 2 percentage points by mid-2011…
CIBC World Markets
….our view …the Fed will stand pat until early 2011…. when interest rates inevitably rise.
BMO Nesbitt Burns
….. a September 2010 rate hike start,… rate hikes are likely to be gradual and could easily be postponed into 2011….
Well, that’s what they say. The real decision on rates however is made by the US Federal Reserve in Washington, and our rates follow suit, once that decision has been made. Note that both Scotia and CIBC made reference to the Fed rather than the Bank of Canada.
Brian Madigan LL.B., Realtor is an author and commentator on real estate matters, Royal LePage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com
{ 2 comments… read them below or add one }
In my opinion …as soon as the US Government stop purchasing the mortgage backed securities than rates will go up. I’m guessing they will return to the 6% – 7% within one year, which really isn’t that bad.
There is a saying “What comes down must go up”. It is obvious that it is time for interest rate to go up very soon. It will go up as fast as it came down. There is no doubt! Just be prepared…