The Bank of Canada today raised its trend-setting overnight interest rate to 4.25 per cent from 4 per cent.
Merrill Lynch was among the nine of the 13 Bay Street brokers who correctly predicted the rate hike. Merrill’s chief Canadian strategist David Wolf now predicts the overnight rate should stay at 4.25 per cent at least through to the end of the year.
“Our interpretation of the statement is that the Bank is comfortable to sit with rates steady so long as there is no material shift in the economic environment relative to the Bank's own “base case” forecast. With core inflation remaining tame, and with our own expectations for it to remain so, we don't anticipate a major deviation (to the upside or down) to knock Canada substantially off course from projections, and so view the Bank's action and accompanying statement as reasonable,” Wolf wrote in a note to clients.