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Canada's 2011 Economic Horoscope: What the Big 5 Banks Predict

Filed under: Banks, Budgeting & Planning, Employment & Careers, Financial Crisis

Things have been on the mend for the Canadian economy and conditions are going to continue to improve this year, Canada's Big Five bank economists say. Even so, economic growth will likely creep along at a slower pace than in 2010, meaning there will be no quick return to the boom times that preceded the recession of 2008-2009.

"Exports remain challenged by a strong loonie, and domestic consumption growth will be moderating, either through rate hikes or other measures, as Ottawa attempts to slow the climb in household debt," says CIBC economist Krishen Rangasamy.

While there is no doubt that the Canadian economy will continue to grow in 2011, economists are divided on exactly how much. Some experts, such as at Scotiabank and CIBC, foresee a slow 2.2% pace of growth in 2011 largely due to the high Canadian dollar, weak exports and struggling foreign economies. Others, such as RBC, have a much stronger outlook.

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Continue reading Canada's 2011 Economic Horoscope: What the Big 5 Banks Predict

Is The Bank of Canada Done Hiking Interest Rates?

by Alia McMullen

Filed under: Banks, Budgeting & Planning, Economizer, Financial Crisis, Investing, Real Estate

The market half expected the Bank of Canada to hike interest rates on Thursday, but it was still a surprise to many given the concerns that remain about the strength of the economy. The central bank raised the benchmark interest rate from 0.75% to 1%, marking the third quarter point increase since the hikes began in June. Banks were quick to follow suit and raise their prime rates by 25 basis points to 3%.

Interest rates have been at abnormally low levels as a result of the financial crisis and the resulting global recession and now with countries out of recession, many central banks, including Canada's, have began to slowly correct these levels. There is a lot of concern among central banks that if interest rates are kept too low for too long another bubble could occur, such as the housing bubble that sparked the U.S. subprime crisis.

Canada's housing market does not appear to be in trouble of bubbling anytime soon, and the central bank has admitted that economic growth will likely be slightly softer than it had expected this year. With three and a half months left of 2010, will the central bank hike again, or will Canadians be spared another rate rise for now?

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