The Bank of Canada declined to raise its key overnight interest rate Tuesday, but there are hints that a rate hike could come sooner than analysts have predicted.

The overnight target rate has remained steady at one per cent since it was last raised in September 2010.

BNN's Michael Kane said the bank didn't give any signs to the financial world Tuesday that the rate would be changing any time soon.

"The majority of people who are talking to us on Bay Street are saying it's going to be 2012," Kane told CTV News Channel on Tuesday morning, just after the central bank announced its rate decision.

"Maybe right at the end of this year, but we're seeing nothing that would say clearly that would be the case."

Speculation that the bank could hike rates before next year provided a boost to the loonie, which was up 0.87 of a cent to 105.16 cents US in afternoon trading.

The bank said future changes to the overnight rate will depend on how the economy fares, as the central bank tries to keep inflation in check.

"To the extent that the expansion continues and the current material excess supply in the economy is gradually absorbed, some of the considerable monetary policy stimulus currently in place will be withdrawn, consistent with achieving the 2 per cent inflation target," the bank said Tuesday.

"Such reduction would need to be carefully considered."

The central bank believes that the economy is on track to return to full capacity in 2012, with the expectation that growth will accelerate in the second half of this year.

Current bank projections see the economy expanding by 2.8 per cent in 2011, 2.6 per cent next year and 2.1 per cent the year after that.

Looking south of the border, the central bank believes that U.S. economy is being dragged down by "a consolidation of household balance sheets and slow growth in employment."

Growth has been better in Europe, though the bank says ongoing austerity measures in some counties will limit economic expansion.

"The U.S. economy has grown at a slower pace than expected and continues to be restrained by the consolidation of household balance sheets and slow growth in employment," the bank said.

"While growth in core Europe has been stronger than expected, necessary fiscal austerity measures in a number of countries will restrain growth over the projection horizon."

In Asia, the bank sees a continuing lag in the Japanese economy that is linked to the disasters the country suffered in March, while growth in China and other emerging-market economies "remains very strong."

CIBC World Markets chief economist Avery Shenfeld said the central bank will likely wait to ensure that its economic growth predictions are on target before moving toward a rate hike.

"The key is the Bank of Canada has to see evidence that its projection for a re-acceleration in economic growth is actually taking place," Shenfeld told The Canadian Press.

"The other issue is whether or not the Europeans will have dealt with their credit issues by the time the September meeting comes in place."

Shenfeld predicts the bank will move on rates this fall. The bank's next rate announcement is scheduled for Sept. 7.

The central bank's take on the Canadian economy will be revealed Wednesday, when it releases its next monetary policy report.

With files from The Canadian Press