The Bank of Canada released its monetary policy announcement today, and it contained the following paragraph:
In response to the sharp, synchronous global recession, the Bank lowered its target rate rapidly over the course of 2008 and early 2009 to its lowest possible level. With its conditional commitment introduced in April 2009, the Bank also provided exceptional guidance on the likely path of its target rate. This unconventional policy provided considerable additional stimulus during a period of very weak economic conditions and major downside risks to the global and Canadian economies. With recent improvements in the economic outlook, the need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus. The extent and timing will depend on the outlook for economic activity and inflation, and will be consistent with achieving the 2 per cent inflation target.
This means that at the next Bank of Canada meeting on June 1, they are likely to raise interest rates. The futures say it will likely be a 0.75% hike up to 1% in June, and then the rate increases will be 0.25%. My new projected schedule of rate increases will be as follows:
June 1, 2010 (+0.75% to 1.00%)
July 20, 2010 (+0.25% to 1.25%)
September 8, 2010 (+0.25% to 1.50%)
October 19, 2010 (+0.25% to 1.75%)
December 7, 2010 (+0.25% to 2.00%)
[…] has changed since my last projection is that the initial rate increase in June 1, 2010 will be 0.50% instead of 0.75%. I still see […]