Today, the Bank of Canada announced that they are holding their key interest rate steady at 0.5 percent, citing that the Fort McMurray wildfires will have a negative impact on GDP in the second quarter. The corresponding prime rate also remains unchanged at 2.70 percent.
The Bank had previously predicted growth at an annualized rate of 1 percent in their last Monetary Policy Report, released in April 2016. However, due to the mandatory evacuation and subsequent shutdown of oil sands operations, preliminary assessments are now indicating a decrease of 1.25 percentage points.
“In Canada, the economy’s structural adjustment to the oil price shock continues, but is proving to be uneven” the Bank has stated.
As oil production resumes and the area is rebuilt, the Bank is confident that the economy will rebound in the third quarter. Economists are predicting that the benchmark interest rate will remain steady for at least the next year.
“We continue to believe the Bank of Canada is on hold for the next year with rate hikes only coming into view in the second half of 2017,” said Benjamin Reitzes, a Senior Economist for the Bank of Montreal.
Inflation has been evolving largely as expected, with total CPI inflation slightly below the two percent target and core inflation nearing two percent.
The Bank is expected to provide a complete outlook for the economy with the release of their next Monetary Policy Report on July 13.
The next Bank of Canada announcement will also take place on July 13. Be sure to check our blog for the latest information on interest rates and other mortgage-related topics. If you have questions about this update and how it affects your mortgage, feel free to contact our office today!