More policy stimulus expected in the second half of this year

While it is widely expected that the Bank of Canada will maintain its policy interest rate at 1% next week, with the same decision now likely at the next meeting in April too, we still think that the longer-term consensus view regarding interest rates is too high. As economic growth slows and unemployment rises this year and next, more policy stimulus will eventually be needed. Although we now expect interest rate cuts to occur later in the year, we still expect the policy interest rate to end this year at 0.50%, where we expect rates to remain throughout 2013.