BUSINESS

C.D. Howe monetary policy council urges Bank of Canada to keep rates on hold

11/27/2014 03:39 EST | Updated 01/27/2015 05:59 EST
TORONTO - The C.D. Howe Institute's monetary policy council recommended Thursday that the Bank of Canada keep its key policy rate at one per cent when the central bank makes its announcement next week.

The Bank of Canada has kept the rate at one per cent for more than four years and economists widely expect that to continue into 2015.

C.D. Howe said its 11-member council was unanimous in recommending that the rate stay on hold for the Dec. 3 meeting as well as the central bank's Jan. 21 rate announcement.

However, the Toronto-based economic think-tank said there was some divergence of opinion about where rates should go next spring.

Nine members of the C.D. Howe council favoured rates to remain where they are in May of next year, while two voted for them to increase to 1.25 per cent.

But by this time next year, sentiment was more aggressive, with only three council members calling for rates to remain at one per cent through the end of 2015, while four wanted to see the rate at 1.25 per cent and the remaining four thought it should rise to 1.5 per cent.

The Organization for Economic Co-Operation and Development predicted earlier this week that the Bank of Canada would begin raising its key interest rate in May and then continue to increase it steadily after that.

It noted that inflation, a key driver of interest rates, has returned to the two per cent range targeted the Bank of Canada, in part due to the weaker loonie.