The Bank of Canada is less likely to pull the trigger on an interest-rate hike this year because of a risk-filled economic environment, TD Economics chief economist Craig Alexander says.
The world economy has simply not made as much progress as had been anticipated in getting past the legacies of the financial crisis and recession, Mr. Alexander writes in a recent report.
Among the reasons cited for a stand-pat stance are low inflationary expectations, the negative impact on Canada and the U.S. of deepening financial instability in Europe, the high loonie’s impact on exports and uncertainty over the strength of the recovery in the United States.
“The reality is that we are not really out of the financial crisis,” he writes.
There is a strong case to be made that an accommodative monetary policy will continue for some time throughout the world, according to Mr. Alexander.
The central bank may well wait until January before moving to raise rates, he says.
“We think they could raise rates from 1 per cent to 2 per cent and then stop again to assess how the economy responds and how international events are unfolding. Such a pause would last several months.”
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