Bank rate expected to remain steady; Carney may give hints on future direction

The Canadian Press ~ The News
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OTTAWA - When it comes to interest rates, all the attention this week will likely be on what the Bank of Canada says, not on what it does.
The central bank is all but certain to keep its short-term policy interest rate at the lowest practical level of 0.25 per cent Tuesday morning.
But some economists believe the bank may give some clue - most likely during Thursday's news conference with governor Mark Carney -
that could tip markets about its intention going forward.
In the spring, the bank issued a surprise conditional commitment to keep rates at the lower boundary until at least July 2010. But some suspect Carney may be having second thoughts given how quickly the country has emerged from recession.
As well, the surprisingly sharp rebound in home sales and prices could give Carney concern that the bank's low interest rate policy is creating another asset bubble and giving rise to inflation.
Merrill Lynch chief economist Sheryl King says the time may have arrived for Carney to put some flexibility back into his monetary policy options. However, even a hint of a raise in interest rates could send the Canadian dollar shooting higher, something the bank wishes to avoid.

Organizations: Bank of Canada, Merrill Lynch

Geographic location: OTTAWA

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