The Bank of Canada kept its benchmark lending rate unchanged at one per cent in its latest policy decision on Tuesday. Since raising its overnight lending rate to one per cent in September, the bank has held steady for four consecutive policy decisions.
But while the bank kept the rate steady, its statement took a cautious tone with regards to future rate hikes.
In recent months, Bank of Canada governor Mark Carney has repeatedly warned Canadians to get their financial houses in order, noting that interest rates will rise at some point.
"For those hoping for discernable hints of hawkishness in the Bank of Canada’s policy statement, those hopes were dashed today," Bank of Montreal senior economist Michael Gregory said in a commentary after the central bank's decision was released.
"While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes," the central bank's statement read.
Last week, the C.D. Howe Institute panel on monetary policy recommended that the bank start raising the rate to ward off future inflationary pressures.
But unfolding conflict in the Arab world and uncertainty about Canada's economic recovery in the interconnected global economy appear to be tying the bank's hands for now.
The persistent strength in the Canadian dollar and Canada’s poor relative productivity performance remain a concern, the bank said.
It is not unusual for the Bank of Canada to signal only moderate changes to its outlook between forecast periods. However, it may be that Carney is not yet a believer that the better economic performance of the past few months will hold up.
Not all economists believe the strong ending to 2010 will necessarily carry enough momentum to be sustained in 2011.
Some, including TD Bank, think the quick start will give way to a slowdown as the year proceeds, much like what happened last year when the economy exploded off the blocks only to slow to a crawl by the third quarter.
"There are no indications here that rate hikes are close," Gregory noted, saying the central bank likely wants to see an improving U.S. economy before assuming Canadian exports will be strong enough to deal with the persistently strong loonie that higher rates would create. "We’ve pencilled in a July resumption of rate hikes.
The bank's next policy decision is due April 13.
This will most certainly have buyers continuing their cautious search for good value in the Vancouver area.