C.D. Howe Institute's Monetary Policy Council Urges Bank of Canada to Raise Overnight Rate to 1.25 Percent on May 31, 2011

TORONTO, May 26, 2011 /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 May 31, 2011. The Council further recommended raising the target rate to 1.50 percent at the following announcement on July 19, 2011, followed by increases that would take it to 1.75 percent in December 2011 and 2.25 percent in May 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. William Robson, the Institute's President and CEO, chairs the Council.

The MPC's formal recommendations for each announcement date are its median votes. The recommendation for May 31 reflected a split between 7 members urging an increase to 1.25 percent and 5 urging no change. Differences in members' assessments of the outlook for growth and inflation, and in the balance of risks affecting each, showed clearly at the 12-month horizon, with 7 members looking for an overnight rate of 2.00-2.25 percent in May 2012, and 5 looking for a rate in the range between 2.75 and 3.25 percent.

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

SOURCE C.D. Howe Institute

For further information:

Kristine Gray

Senior Coordinator, Research/

Executive Assistant to the Vice President, Research

C.D. Howe Institute
300-67 Yonge Street, Toronto, M5E 1J8
Phone: 416-865-1904x241; Fax 416-865-1866


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