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?
Although some were expecting a possible increase to the central bank’s key interest rate this morning, a weakened global outlook was a large factor in their decision to hold the rate steady at 1.75 percent today. The last rate increase took place just over a year ago, in October 2018. The weakened global economy can be attributed to the ongoing trade conflicts and high level of uncertainty detailed in our previous Bank of Canada announcement.
What Information did the Bank Share about the Canadian Economy?
- Ongoing trade conflicts have impacted Canada with a recent dip in commodity prices; however, the Canadian dollar is relatively strong in comparison with other currencies.
- In particular, business investment and exports are expected to weaken before expanding again in 2020 and 2021.
There is, however, strong activity in the Canadian services sector - with domestic demand being supported by “government spending and lower borrowing rates.”
- Employment continues to be a source of strength in the Canadian economy, with wage growth picking up in turn.
- The bank continues to monitor the impact of recent changes to the housing market (including the newly implemented first-time homebuyers incentive program and the qualifying stress test).
- GDP growth is projected to hit 1.5 percent this year, 1.7 percent in 2020 and 1.8 percent in 2021.
Will there be any Interest Rate Changes in the Near Future?
The central bank always aims to set its rate within neutral range, which is currently between 2.25 and 3.25 percent. With only one rate announcement left for 2019 - scheduled to take place on December 4th - the rate is expected to remain at 1.75 percent until at least 2020. Governing Council continues to pay particular attention to the global slowdown, recent fiscal policy developments, and “sources of resilience in the Canadian economy.”
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!