calgary-mortgage-rates-to-remain-at-the-same-level

In a research note, RBC says, “Faced with the revival in nervousness about the prospects for the global economy, particularly the European financial and government sectors, and the uncertainties about the spillover effects into Canada combined with already present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought.”

It now expects that the BoC will maintain its policy rate at 1.00% at its fixed action date next week, “with an eye to restarting the process to lessen the amount of policy stimulus in September”.

“Our forecast for the overnight rate at the end of 2011, therefore, is reduced to 1.75% from 2.00%. We maintain our call that the overnight rate will be 2.5% in mid 2012 as the economy reaches its productive capacity,” it says.

Nevertheless, RBC’s overall outlook for the economy is unchanged, with growth forecast at 3.2% in 2011 and 3.1% in 2012. Additionally, it says that the persistent strength in the housing market and the growth in household credit means that the BoC will not be able to stay on the sidelines for too long without jeopardizing a stronger than anticipated pick up in inflation pressures