Bank of Canada maintains overnight rate target at 1 per cent

“Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. Robust demand from emerging-market economies is driving the underlying strength in commodity prices, which could be further reinforced temporarily by supply shocks arising from recent geopolitical events,” said the Bank.

TD senior economist Pascal Gauthier said in a statement that he thinks July 19 is the likeliest date for a raise in the BoC policy rate. “Those looking for a change to a more hawkish tone, particularly in the forward-looking guidance part of the statement were disappointed.”

RBC said today’s announcment indicates that the Bank needs to be convinced that the stronger momentum will continue. “Our forecast is that the economy will record another solid gain in the first quarter of 2011 of 3.7 per cent and that the economy will grow by 3.2 per cent this year, which is well above the Bank’s current 2.4 per cent estimate. The balance of risks to the Bank’s current outlook is clearly skewed to the upside, and we maintain our call for 100 basis points of rate increase in 2011 with the first hike coming in May 2011,” said Dawn Desjardins, assistant chief economist, RBC Economics.