Real economic activity was stable in 3Q 2005, and despite the expected monetary tightening by the Bank of Canada (BoC), looks on track to grow close to 3.0% for the year. Next year should see 3.2% growth. There are signs that inflationary pressures may be building, although high energy costs have not yet passed through to other prices. The housing market appears to have peaked, displaying increasing volatility and a gradually declining level of underlying activity.
We now expect another 25 bp move by the BoC in December, to bring the key policy rate to 3.25% by end-2005. Our end-2006 forecast for this rate remains 4.00%. The 10-year bond yield is now expected to be 4.7% by this year-end and 5.2% by the end of the next.
( Full Report, 1 pages, pdf, 96 KB).
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