BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

July 17, 2012 11:41 ET

No Increase to Bank of Canada Overnight Rate Until July 2013-BMO Economics

Bank of Canada still has tightening bias, but unlikely to act on it

TORONTO, ONTARIO--(Marketwire - July 17, 2012) - The Bank of Canada today announced that the overnight rate will remain at 1 per cent, where it has been since September 2010 - reaffirming BMO Economics' earlier forecast that rates will not rise until next year. The bank also indicated, however, that Canadians should not be expecting any rate decreases similar to those made recently by many other central banks.

"There was some debate on whether the Bank would maintain its mild bias toward raising rates - even as the rest of the world eases, or tries to find some way to ease," said Doug Porter, Deputy Chief Economist, BMO Capital Markets. "In the end, the Bank's stuck with its stance that the next move is more likely to be a rate hike than a rate cut."

Mr. Porter noted that the maintenance of the tightening bias is likely a signal that the Bank has absolutely no intention of following the easing lead of many other central banks, but at the same time they are highly unlikely to act on that bias anytime soon. "We suspect the Bank is going precisely nowhere with interest rates over the next year, as has been the case for almost the past two years. In the current global economic climate, restraint is the better part of valour."

Laura Parsons, Mortgage Expert, BMO Bank of Montreal, noted that saving on interest costs over the long term should be high on the priority list for any prospective home buyer.

"While interest rates have been at historic lows, the inevitable climb will happen. Choosing a fixed mortgage can provide protection against rising rates and make the cost of owning a home more manageable in the long run," said Ms. Parsons.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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