Bank of Canada remains cautious

The policy statement from the Bank of Canada this morning highlighted that ultimately it will raise rates at some point, this year or next year, but even then it said the extent of any policy tightening would need to be carefully considered. We still think the Bank will hold its policy rate at 1% for the remainder of this year and next. If we are wrong, rates are unlikely to go up more than once or twice before the economic recovery will show clearer signs of struggling.