Although the economy most likely rebounded in third quarter, by an estimated 2.9% annualised, it is widely expected that the Bank of Canada will hold its key policy interest rate at 1% next week. The worsening sovereign debt crisis in Europe, which the Bank now admits looks barely contained, has weakened global economic growth prospects. As such, we think the Bank's next move will be to lower interest rates, possibly in April or June next year, from 1.00% to 0.50%. More importantly, we doubt that interest rates will go up at all between now and the end of 2013.
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