Retail credit demand has jumped two per cent above the same period last year.

"Private credit demands are picking up and we're in the phase of the expansion when that should be happening," he said.

As a result, credit demand is likely to remain moderate.

Private credit demand is likely to grow at a more moderate pace than in the 1980's, many economists predict.

Faster economic growth, especially growth above 3 percent, is associated with rising credit demands, more inflation and upward pressure on interest rates.

"Typically, increases in inventory investment lead to higher credit demands."

Net new credit demand, however, was quite weak and is likely to remain so.

But if the economy is to grow at more than its current anemic pace, private credit demand will need to pick up.

Under the market's logic during the 1980's, short-term rates usually moved up with a surge in credit demand.

"He's very reluctant to borrow, and credit demands are very light."