In advance of Thursday’s interest rate announcement by the Bank of Canada, the C.D. Howe Institute’s Monetary Policy Council and various economic forecasters are calling for the bank to hold its target for the overnight rate at 0.25%.

The Monetary Policy Council, which is chaired by William Robson, the C.D. Howe Institute’s president and CEO, provides an independent assessment of the monetary stance most appropriate for the Bank of Canada as it seeks to achieve its 2% inflation target. All eleven members at the council’s most recent meeting recommended that the Bank maintain a target of 0.25% at the next setting.

The council’s interest rate recommendations are largely in line with the expectations of economists.

“The Bank of Canada will likely give a nod to increased signs of economic growth in its “no change” interest rate decision,” said CIBC World Markets economist Avery Shenfeld.

TD Securities’ senior economics strategist Charmaine Buskas agreed. “The broad brush strokes of the outlook have improved sufficiently to suggest a positive third quarter GDP result, but not sufficiently changed as to suggest the Bank of Canada will revise its policy stance,” said Buskas. “If the economy unfolds as expected, the Bank of Canada has little reason to change its stance that the overnight rate will remain at 0.25% until the end of the second quarter of 2010.”

The Monetary Policy Council also recommended that the Bank of Canada keep the target at 0.25% until mid-2010. The Bank should not deviate from its conditional plan to maintain the rate at its current level “unless circumstances clearly justified a change,” the council said.

Beyond the term of the conditional commitment, the council expects to see an overnight rate of 0.75% a year from now.

The council noted continuing improvement in most domestic economic and financial indicators. In particular, members pointed out the strength in residential real estate and government spending, and signs of current and incipient strength in credit markets, monetary aggregates and share prices.

The panel members also acknowledged potential barriers to growth, including weak export growth, with the U.S. and Chinese economies remaining dependent on government stimulus.

The council is set to hold its next vote on Oct. 15, prior to the Bank of Canada’s interest rate announcement on Oct. 20.