Instead, a tightening of monetary is now not expected until early 2012, when the overnight rate will likely climb to 2% by the summer.
TD Economics projected in a report released Tuesday that the overnight rate would eventually reach 3% by 2013, a high not seen since early 2008.
"This delayed and slow rebalancing of monetary policy reflects the risk-filled economic environment, which has reduced confidence in model-based economic projections that predict a closing of the output gap in mid-2012," the report said. "It also reflects the possibility that there is more slack in the economy and that the 'neutral' level of interest rates may be lower than previously thought."
While TD Economics set a date in early 2012 for the raising of rates, it cautioned that it the future truly depended on a global chain of events. European and American economies will play a major part, as well as events in the Middle East. That global unpredictability could alter the path.
But even so, low rates are expected to remain low for a while. The main exception could come if inflation rises and becomes more of a factor in Canada.
"So long as inflation expectations are in check, the Bank (of Canada) seems inclined to wait until the risks have diminished before rebalancing policy and is comfortable with keeping interest rates at highly stimulative levels for quite some time," the report said.
Realtors across the country have the low rates for continuing to push buyers into an active market in Canada. It looks like more of the same confidence in buyers involving low rates can be expected at least through the end of the year.
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