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The Bank of Canada was true to its word. The benchmark lending rate remains unchanged at 0.25%, as the Bank repeated its conditional commitment to hold current policy rate until the end of the second quarter in 2010.

The Bank rate is unchanged at 0.50% and the deposit rate is 0.25%.

The decision to maintain the overnight rate is broadly consistent with the Bank’s medium-term outlook for Canada’s output and inflation. According to the Central Bank, “the economy is undergoing major restructuring in a number of sectors. There will be continuing downward pressure on inflation caused by the widening output gap that is expected to continue through Q3 of 2009. Also, global and Canadian recovery will be more muted than usual.”

In the statement explaining its decision, the Bank also expressed its concern about the dollar’s recent increase. It fears that the rapid rise in the Canadian dollar may undo all the progress in the economy (e.g. increase consumer confidence).

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 to achieve the inflation target.

The next scheduled date for announcing the overnight rate target is July 21, 2009.

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Parents concerned about children mismanaging inheritance

Wealthy Canadians who plan to bequeath inheritances doubt their children will manage the assets wisely.

A research study by Ipsos Reid and commissioned by BMO Harris Private Banking showed that 80% of high-net-worth individuals (estate value of $500,000 +) have a will in place. Of those individuals, 22% indicated they were very concerned about their children’s ability to manage their estate responsibly.

This growing worry has generated demand for financial education, says Jean Blacklock, vice-president & managing director, wealth services, and CEO of BMO Trust Company. “We are finding there is an increased demand from our clients at the Private Bank to help teach children the essentials about money management,” she says.

The research indicated that the two main causes of parental concern was wasteful spending, followed by children being under influence of people the parents consider untrustworthy.

To help their children manage estate assets, 31% of parents have included suggestions in their will and 43% plan to use a trust created through the will.

Despite concern about children’s money management skills, only a small group, 38%, have discussed this concern with a financial professional.

The study used a national sample of 536 Canadians.

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BMO offers ETFs

Today is the first day of trading for BMO exchange-traded funds. This makes BMO Financial Group the only major Canadian financial group to offer a family of ETFs.

The ETFs are offered through Jones Heward Investment Counsel Inc., an operating company within BMO Asset Management, and the trustee and manager of BMO ETFs.

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Clients want respect

What makes customer service great? Eighty-five per cent of Canadians say respect makes all the difference, according to the third annual TD Canada Trust poll.

In fact, most respondents indicated that how they are treated ranks above freebies, discounts and gift certificates.

“Customers are telling us they still want the same things, like security for their family, a home, a good life, but they’re scared right now. Their financial situation may be different but they are the same good people and they want companies to acknowledge that and to take care of them by listening to them and treating them right, which is, of course, what respect is all about,” says Tim Hockey, president and CEO, TD Canada Trust.

He added that customers are more sensitive during tough economic time and treating them with respect can preserve customer loyalty.

The poll found that people from Ontario and Alberta (94% and 92%, respectively) are most likely to talk about their encounter with poor customer service, compared with 68% of Quebecers.

The poll also revealed that 78% of British Columbians believe their customer service experiences have influenced others in their purchase decisions, whereas only just over half (53%) in Atlantic Canada believe the same.

The TD poll was conducted by Angus Reid Strategies and surveyed 1,007 men and women.

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Scotia forecasts global economy on the verge of recovery

In their monthly global forecast update, Scotia Economics stated the global economy is closer to recovery than they previously stated.

“Although the restructuring and retrenchment underway in a number of key sectors and regions will remain a significant drag on the pace of activity, strong cyclical forces are providing much-needed impetus to growth,” said Warren Jestin, chief economist, Scotiabank. “Canada and many other countries around the world are expected to piggyback on the renewed momentum being generated by the globe’s primary economic engines, the United States and China. The recovery should become increasingly more broadly based, with the likelihood of accelerating economic gains through the balance of this year extending into 2010.”

According to the report, global output growth is now expected to average 2.6% in 2010, at roughly half-percentage point higher than our previous forecast.

Further to the report, China will continue to be the global growth leader. Improvements in international trade will boost economics prospects this year and next causing GDP to advance by approximately 7% and 9%, respectively.

However, the largest revision in the forecast is the growth of the U.S. The expectation now is that the rapidly changing growth dynamics in the U.S will produce a 2.8% average advance in 2010, a full percentage point higher than the prior forecast and reversing this year’s anticipated 2.6% decline.

(06/04/09)