Bank of Canada Expected to Delay Rate Hike

Analysts predict that the Bank of Canada will leave the overnight rate at the current one percent when it announces its interest rate decision Tuesday morning at 9 a.m. Toronto time. In fact, bets are increasing that Governor Mark Carney will push for holding the line until at least the end of the first quarter of the new year.

After raising rates a quarter point on three successive occasions mid-way through 2010, the Bank has kept rates unchanged since last September. With the US economy recovering more slowly than originally anticipated, inflation worries in the Canadian economy have since eased. The US accounts for nearly 70 percent of Canada’s exports and while demand for these goods is growing, it mirrors the rate of recovery in the US and is likewise advancing at a slower rate than expected.

The Canadian government also announced today changes intended to make it more difficult to qualify for a mortgage. The move comes in response to a red-hot housing sector in Canada and worries that personal debt loads are nearing dangerous levels. These changes include restricting the maximum amortization period for mortgages qualifying for government-backed insurance to thirty years from thirty-five. Homeowners will also be limited to borrowing a maximum of eighty percent against their property value down from ninety percent.

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