Bank of Canada Announcement - January 22, 2020

Posted on 22 January, 2020

What Does the Bank of Canada do?
Eight times per year, the Bank of Canada (BoC) makes an announcement about their base lending rate based on data they have assessed about the current state of the Canadian economy. Any change to this rate indicates a possible change to corresponding rates, such as interest rates for mortgages and additional types of consumer loans. This is because the rate set by the bank will directly affect prime rates offered by banks and other financing lenders. For more information, our recent blog post breaks down four of the most frequently asked questions regarding the BoC.

Were there any Changes to the Interest Rate?
The Bank of Canada held the interest rate steady at 1.75 percent this morning, during their first policy rate announcement of 2020. The bank cited resilience within the Canadian economy, however the uncertainty detailed in our September 2019 update remains high. Geopolitical tensions are also in a state of escalation and will play a large role in Canada’s economic development throughout this year.

What Information did the Bank Share about the Canadian Economy?

  • Economic growth projections have downgraded, with 0.3 percent estimated for quarter four of 2019 and 1.3 percent for quarter one of 2020
  • The bank attributes the slowdown due, in part, to recent extraordinary factors such as strikes, poor weather conditions, and inventory adjustments
  • There was strong overall investment in the residential housing market in 2019
  • Canadians can expect to see growth in household spending, and moderate improvements to business investment and exports this year
  • Real GDP is estimated to grow by 1.6 percent in Canada during 2020, and 2 percent in 2021
  • Inflation remains near the two percent target, with slight fluctuations expected throughout 2020 in response to volatility in energy prices

Will there be any Interest Rate Changes in the Near Future?
The central bank always aims to set its rate within neutral range, which has remained between 2.25 and 3.25 percent since March 2019. The general consensus among analysts is that the next rate change will be a decrease, however whether that will occur in 2020 or 2021 remains unclear. The next rate announcement will be released on March 4, with the central bank paying particular attention to the recent slowdown in growth as well as “developments in consumer spending, the housing market, and business investment.”

How Can I Learn More?
For up-to-date information on interest rates and other mortgage news, you can follow us on Facebook or Instagram. Questions about today’s announcement? Leave a comment below, or contact our office and speak to one of our Mortgage Brokers today!

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