Eight times per year, the Bank of Canada meets to determine what the base lending rate should be. Any change to this industry benchmark indicates a possible change to corresponding rates, such as interest rates for mortgages and additional types of consumer loans. This information is also a good indicator of the current status of the Canadian economy.
In a scheduled announcement made by the Bank of Canada this morning, the overnight lending rate has remained unchanged at 0.5 percent. The corresponding prime rate offered by most major Canadian lending institutions has also held steady at 2.7 percent, while TD Bank has opted to keep its prime rate at 2.85 percent since the increase in November 2016.
GDP on a global scale is expected to rise from 3 ¼ percent to 3 ½ percent over the next two years. In Canada, the Bank predicts growth of 2 ½ percent in 2017 and slightly under 2 percent throughout 2018 and 2019. According to the central Bank, “during the rest of this year and into 2018 and 2019, growth in Canada is expected to moderate but remain above potential.”
Although uncertainty remains high around the direction of the global economy, the Bank has noted that growth is strengthening and “becoming more broadly-based” than it had projected in January’s Monetary Policy Report (MPR). Likewise, economic growth in Canada has also risen at a faster pace than estimated in the January MPR – however, the Bank believes that “while the recent rebound in GDP is encouraging, it is too early to conclude that the economy is on a sustainable growth path.”
Total CPI inflation is now sitting at the 2 percent target in Canada, however recent data shows a decrease in the three measures of core inflation. “CPI inflation is expected to dip in the months ahead, as the temporary factors unwind, and then return to 2 per cent later in the projection horizon as the output gap closes,” the bank stated in their press release this morning.
The next rate announcement will take place on May 24, 2017, with most Canadian Economists predicting no change to the Bank’s benchmark interest rate at that time.
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