Remember, any contributions to a RRSP account before 10:30 p.m. ET on Monday, March 3, 2014 will be eligible for a receipt for your 2013 tax return.

Bank of Canada key rate is unchanged again……

Most economists say rates should hold steady well into next year.

Bank of Canada announces no change to prime lending rate. Current prime remains unchanged at 3.00%

Take note of this interesting article about our Canadian Economic Forecast for the coming months:

Bank of Canada sees limit to low interest-rate strategy

by Randall Palmer, Reuters
7:41 AM, E.T. | January 11, 2013
Canadian, Economy

High household debt is stretching the Bank of Canada’s low interest rate strategy to the limit, Senior Deputy Governor Tiff Macklem said on Thursday, hinting that the central bank will retain its bias toward higher interest rates.

Macklem, considered the strongest candidate to be the next governor of the central bank after Mark Carney leaves later this year, said keeping rates low for the longest period since the early 1950s was the right thing to do during the global financial crisis and in its aftermath. “It was the right thing to do… That strategy is reaching its limits and rising levels of household indebtedness have created a vulnerability,” he said in response to a question from the audience following a speech at Queen’s University in Kingston, Ontario.

Macklem said in his speech that the Canadian economy will likely be more sluggish than expected in the near term but that momentum will pick up throughout 2013. “We continue to expect economic activity to pick up through 2013, but near-term momentum now appears to be slightly softer than previously anticipated,” Macklem said. “These and other developments will all be taken into consideration as we revise our economic projections, to be published on January 23 with the next interest rate decision,” he added.

The bank is expected to keep its benchmark interest rate on hold at 1.0 percent later this month. But it has been hinting for months that its next move will be up, not down and the debate in markets is just how soon it will act.

Market players surveyed by Reuters in late November forecast the bank would raise rates in the fourth quarter of this year. Yields on overnight index swaps, which trade based on expectations for the policy rate, show traders do not fully pricing in a rate hike this year.

In another hawkish sign, Macklem repeated comments by Bank of Canada Governor Mark Carney that in the current circumstances, the bank may want to set interest rates higher than would normally be warranted to reach its 2 percent inflation target within six to eight quarters.

He cited Canada’s record high household debt as a factor that could influence the timing and degree of any rate increases. “If the bank were to lean against such imbalances, we would clearly say we are doing so, and indicate how much longer we expect it would take for inflation to return to the 2 percent target,” he said, echoing previous remarks made by Mark Carney, the bank’s current chief.

Michael Gregory, senior economist at BMO Capital Markets, believes the bank’s January 23 announcement will keep its language on the need to raise interest rates.

“It will be retained even though the Bank’s economic projection will be downgraded … and the output gap, currently expected to close by the end of 2013, might be pushed into early 2014,” he wrote in a note to clients.

Macklem’s speech is being closely watched as he is widely viewed as the most qualified candidate to take over as governor after Carney leaves to be the next governor of the Bank of England.

Debt accumulation by Canadian consumers is slowing and if the trend continues the ratio of household debt to income – which hit a historic high of 163 percent in the third quarter of last year – will stabilize later this year, he said.

Fears of an overheated housing market are also starting to wane amid signs real estate activity is cooling. Macklem predicted housing construction would moderate to come in line with demographic demand at some point this year. He warned though, that it was too early to tell if these trends would last. While he stressed the bank’s commitment to keeping inflation low and stable, Macklem also highlighted the need for flexibility in the time it takes to reach the inflation target. The global crisis taught us that price stability and financial stability are linked, he said, and one should not be pursued without keeping an eye on the other. “It may be appropriate in some circumstances for monetary policy to complement macro-prudential policy and contribute to financial stability directly.”

THE CURRENT CONSUMER BANK OF CANADA PRIME LENDING RATE IS 3.00%

RATE WATCH: Most lenders across the board have notified us that rate hikes are on the way! Bond Yields were up yesterday and up another 5 bps this morning, presently sitting at 1.53%…….on December 31st the bond yield was 1.38%……..I suspect that we will see movement in rates by Monday…..anticipating rates to move 15bps to 20 bps

Canada Mortgage and Housing Corporation is adding its voice to those announcing a slowdown in Canada’s housing market.

The Crown corporation’s third quarter market review projects “measured” growth through the rest of this year and into next. CMHC sees a slowdown in housing starts and in price growth and points to “balanced” housing markets in most Canadian centres.

The CMHC forecast supports what already appears to be happening across the country. The Canadian Real Estate Association says its July figures indicate a balanced market.

Prices dropped a modest 2% from a year ago while sales remained virtually flat compared to June and new listings decreased a moderate 3.3% from June.

Still market watchers remain divided over the impact on the economy. Some point to the broader impact the housing industry has on employment and consumer spending. They say job losses from a slowdown in construction and the fact that falling home prices will have Canadians feeling less wealthy could be a serious drag on the economy. Several others see a 10% to 15% dip in home prices over the next two to three years as a modest contraction, especially compared to the vigorous and price growth experienced over the past decade.

The Bank of Canada is moving its interest-rate announcements to Wednesdays from Tuesdays starting in January and merging the release of the decisions with its quarterly economic forecasts.

The last three decisions of this year will continue with the current format of interest-rate decisions on Tuesdays at 9 a.m. in Ottawa unless there is a public holiday, the central bank said today. There will be consultations to determine when on Wednesdays the rate decisions, and Monetary Policy Reports will be released together next year.

The move aims at providing more clarity to investors, who must currently read the central bank’s two key policy documents on separate dates to interpret its thinking.

“Publishing the MPR at the same time as the interest-rate announcement provides full and immediate context for the rate decision, which improves transparency and helps the bank explain its monetary policy more effectively,” the central bank said.

Governor Mark Carney will continue to hold press conferences after the MPR reports are released, the bank said today.

“That’s all to the good, it allows financial markets to have a better grasp of the central bank’s view of the economy,” said Paul Ferley, assistant chief economist at Royal Bank of Canada in Toronto. “In the past they could talk about growth coming in faster than expected and give you a number but it wasn’t clear where in the year the upward revision was.”

Fixed Dates

The central bank moved to fixed rate-announcement dates in 2000, and said today it “retains the option of making unscheduled rate announcements at any time in the event of extraordinary circumstances.”

The remaining rate decisions for this year are Sept. 5, Oct. 23 and Dec. 4. The next MPR will be released Oct. 24 at 10:30 a.m.

Next year’s announcements are Jan. 23, March 6, April 17, May 29, July 17, Sept. 4, Oct. 23 and Dec. 4. The quarterly economic forecasts will be published with the decisions in January, April, July, and October.

The benchmark interest rate has been at 1 percent since September 2010, the longest pause since the 1950s.

Key interest rate stays put! BoC announced prime lending rate remains steady at 3.00%. Next BoC meeting is scheduled for Sept 5, 2012.

Rate Prediction:

A growing number of analysts have been backing up the time line for an interest rate hike by the Bank of Canada. Through the last quarter of 2011 and the first quarter of this year the call was for a 25 to 50 basis point hike by late 2012 or early next year. Now that’s being rolled back to the middle of 2013.

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