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Analysis-Bank of Canada neutral rate seen up in ‘Goldilocks’ shift for borrowing costs

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The Bank of Canada is likely to raise next month a key signpost for the level that interest rates are headed over time, in a potential blow to heavily-indebted Canadians who got used to rock-bottom borrowing costs in recent decades, analysts say. The neutral interest rate is the level where short-term rates are expected to settle once economic shocks fade and inflation goes back to normal. BMO Capital Markets, RBC Dominion Securities and TD Securities have forecast that the Canadian central bank will raise its estimate of the neutral rate by 25 basis points to a 2.25%-3.25% range, with a midpoint of 2.75%, at an economic update on April 10.

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