Canada's Housing Bubble

Mar 22, 2010 Derek Abma montrealgazette.com

Those seeking more clarity from Bank of Canada governor Mark Carney on when interest rates are going to rise might get some on Wednesday.

There is a lack of major economic reports for Canada due in the next five business days. However, much attention will be paid to Carney when he speaks at a conference in Ottawa organized by the Canadian Association for Business Economics.

Last April, the Bank of Canada lowered its overnight target interest rate to a record-low 0.25 per cent and said it would more than likely keep it there until at least July this year.

At the time, it forecast Canada's core inflation rate would fall short of the preferred two per cent annual rate until the latter part of 2011. That hasn't exactly worked out as planned.

The latest report from Statistics Canada put core inflation - which strips out volatile items like energy and certain foods - at 2.1 per cent. That was up from a two-per-cent annualized rate in January, and ahead of economists' expectations for 1.7 per cent in February.

"I think that is shaping up to be a pivotal (speech by Carney)," said Millan Mulraine, economics strategist with TD Securities. "Markets will certainly pay a lot of attention to that. If there is any inclination on his part to provide any hints to the markets, this would be an ideal opportunity for him."

Avery Shenfeld, chief economist with CIBC World Markets, said Carney is likely to be subtle in any commentary about interest rates in Wednesday's speech, sticking close to what's already been said.

"The market has priced in rate hikes beginning in the summer, and I don't expect Carney to say anything to disabuse them of that notion," Shenfeld said.