C.D. Howe Institute's Monetary Policy Council Urges Bank of Canada to Raise Overnight Rate to 1.25 Percent on March 1, 2011

TORONTO, Feb. 24 /CNW/ - The C.D. Howe Institute's Monetary Policy Council (MPC) today recommended that the Bank of Canada raise its target for the overnight interest rate, the very short-term money-market rate the Bank targets for monetary policy purposes, to 1.25 percent at its next announcement on March 1, 2011. The Council further recommended raising the target rate to 1.50 percent at the following announcement on April 12, 2011, followed by increases that would take it to 2.00 percent in September 2011 and 2.75 percent in March 2012.

The MPC is a panel sponsored by the C.D. Howe Institute to provide an independent assessment of the monetary stance most appropriate for the Bank of Canada as it seeks to achieve its 2 percent inflation target. Finn Poschmann, the Institute's Vice President, Research, chaired the sixty-first meeting of the Council.

The MPC's formal recommendations for each announcement date are its median votes. The recommendation for March 1 reflected a split vote, with three of the nine members attending the meeting urging an unchanged target, and five recommending an increase to 1.25 percent and one recommending an increase to 1.50. The range of recommendations among MPC members tended to increase as the time horizon extended. In their calls for the April 12 setting, two members recommended a target of 1.00 percent, one recommended 1.25 percent, five urged 1.50 percent and one urged 1.75 percent. Recommendations for the target in March 2012 ranged from 2.00 percent to 4.00 percent.

For the full discussion go to: www.cdhowe.org

SOURCE C.D. Howe Institute

For further information:

Kristine Gray — phone: 416-865-1904; e-mail: kgray@cdhowe.org.


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