Bank of Canada will raise interest rates

| July 12, 2005 | 0 Comments
Bank of Canada will raise interest rates

While the Bank of Canada has kept its overnight interest rate steady at 2.5 percent this month, unchanged since October, it said on Tuesday that interest rates would have to rise “in the near future.”

That statement was interpreted to mean that rates will likely rise at the next two opportunities, which will come on September 7 and October 18.

The bank will release its Monetary Policy Report on Thursday, detailing the reasons behind its statement on interest rates.

The Canadian dollar rose to its highest value in relation to the US dollar in three and a half months just before the bank’s announcement, to C$1.2034, while bond prices fell in anticipation of the higher interest rates.

Some analysts see the possibility that Canadian interest rates will now rise at all three possible opportunities for the rest of the year, in December as well as on the September and October dates.

Although this is the first time that the bank has explicitly stated that rates will rise soon, it had said in April that the prospect of higher rates at some point was there.

The bank also said that it expects the economy to continue at near capacity this year and next, and that it expects inflation, now at 1.6 percent in Canada, to return to 2 percent by the end of next year.

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