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Monday, October 26, 2009

Interest rates to remain at historic lows: Carney

Interest rates will likely stay at their current historic lows through June 2010 in an effort to meet the Bank of Canada's inflation target of two per cent, says governor Mark Carney.

Speaking to CTV's Question Period Sunday, Carney confirmed speculation that interest rates would remain at 0.25 per cent, the lowest rate Canada has ever seen, well into next year.

When asked if Canadians should lock in to five-year mortgage terms on the news, Carney demurred.

"It's not my job to give investment advice to Canadians," Carney said. "But on the general point anybody, anytime they borrow for a longer period of time, wants to think about, 'Can I sustain that borrowing over the course of that time? What happens when interest rates ultimately normalize?'"

Carney reiterated earlier Bank predictions that the Canadian economy will continue to grow, by three per cent next year and by 3.3 per cent in 2011.

"That's more modest than usual recovery, so it's not going to feel like a gangbusters recovery," Carney said. "But it is a recovery and that's important."

According to Carney, government stimulus will continue to foster growth in the short-term. But investments from the business community will kick in by 2011 and beyond, when public money dries up.

"True growth comes from the private sector," he said. "And the private sector is starting, even after what has been a very difficult recession -- a short, but very deep recession -- is starting from a position of strength. Corporate balance sheets are in outstanding shape, the best they've been in 25 years in this country."

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