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Outlook for interest rates, inflation are key trends as banks set to report earnings

The central banks of Canada and the U.S. are expected to start raising rates in March
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Bank towers are shown from Bay Street in Toronto91ÂãÁÄÊÓƵ™s financial district, on Wednesday, June 16, 2010. Investors watching bank earnings that start this week will be keeping a keen eye on any hints at how the institutions will fare with the two big trends this year: rate hikes and inflation. THE CANADIAN PRESS/Adrien Veczan

Investors watching bank earnings that start this week will be keeping a keen eye on any hints at how the institutions expect to fare with the two big trends this year: rate hikes and inflation.

The central banks of Canada and the U.S. are expected to start raising rates in March, so analysts will be watching for any outlook changes from Canadian banks on how they expect the higher rates to play out, said Scotiabank analyst Meny Grauman in a note.

He says that expenses will be another key trend to watch as wages and other costs rise in the competitive growth environment.

RBC analyst Darko Mihelic says that bank CEOs have so far been saying inflation risk is manageable, but he91ÂãÁÄÊÓƵ™ll be looking for any change in tone given recent inflation data and the rising costs U.S. banks reported in January.

Mihelic says that for first quarter results, he expects to see improved loan growth and continued low credit loss provisions.

Royal Bank kicks off earnings on Thursday, followed by CIBC and National Bank on Friday, BMO and Scotiabank on March 1, and TD Bank on March 3.

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The Canadian Press


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