Tax Rate Hike Probable in May

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The Bank of Canada leads the G7 group when it comes to hiking the interest rate. After raising the rate up to 1% from last June's record low level of 0.25%, it is expected to raise the rate again in May.

A Reuters poll of economists reflects the belief that the rate will remain untouched during the March 1 and April 13 policy announcements, but since Canada's resource-rich economy continues to cope well with a strong currency and the disturbances in North Africa, the Bank will be forced to move the rate one step closer to the standard rate in order to prevent inflation pressure. A December trade report showed, at first, a positive trade balance after nine months of deficits, while inflation reached 2.3% in January, which is above the Bank's 2% target.

The experts' poll suggests that the rate may gradually grow in the following months, reaching 2% at the end of 2011 and 3% at the end of 2012. This development will naturally reflect mortgage rates, and may slow down the real estate market across Canada.

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