The Bank of Canada will stick to its conditional pledge to keep its benchmark interest rate at its current near-zero level through the second quarter of next year, most Canadian primary securities dealers said on Friday.

Eight of Canada’s 12 primary dealers polled by Reuters predicted the slow pace of economic recovery will prevent the Bank of Canada from lifting its key interest rate above the current 0.25% level, an historic low, until after the first half of 2010.

“Given the state of the economy and the fact that we expect the recovery to be very mediocre and modest, there is really no need to tighten any earlier than that,” said Carlos Leitao, chief economist at Laurentian Bank Securities in Montreal.

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In a thorough assessment of how the country’s policy makers and financial institutions are handling the global financial crisis, the IMF gives the federal government and the Bank of Canada glowing reviews.

But it also warns of dangers ahead, and tells policy makers not to rest on their laurels.

“Be watchful and prepared to respond as necessary,” said Charles Kramer, division chief of the IMF’s Western Hemisphere Department and mission chief for Canada.

He said the IMF is in the midst of lowering its forecast for Canada’s output in 2009. The official projection, for now, is for a contraction of 1.2 per cent, but that will come down as the IMF takes into account the deep contractions taking place in Canada’s main trading partners.

“Looking ahead, output is likely to contract significantly in the near term, recovering as the full effects of policy stimulus are felt,” the IMF’s concluding statement says.

On Tuesday, Prime Minister Stephen Harper used his first major speech on the economy to pump up Canada’s prospects, claiming Canada will emerge faster than other countries from the global recession. But Mr. Kramer said it’s impossible to say right now whether Canada’s recovery will be faster than elsewhere.

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