Eight times a 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.
Today, the Bank announced that they are holding their key interest rate steady at 0.5 percent. The prime rate at major Canadian lending institutions also remains unchanged at 2.7 percent.
The economy shrank at an annualized rate of 1.6 percent over the second quarter of 2016, attributed to the Fort McMurray wildfires in May and a larger-than-expected decrease in exports. While this decrease occurred at a faster pace than projected in July’s Monetary Policy Report, the bank does expect the economy to rebound in the third quarter.
The jump in GDP growth for quarter three is estimated to occur as oilsands production resumes and the areas affected by the wildfires begin rebuilding. Increased infrastructure spending in Ottawa and the newly implemented Canada child benefit program are also expected to boost the economy throughout the latter half of the year.
Inflation is roughly in line with expectations, with total inflation below the 2 percent target and core inflation around 2 percent.
The bank also stated that there are "preliminary signs of a possible moderation in the Vancouver housing market." Poloz noted that the skyrocketing real estate prices in both Toronto and Vancouver are unsustainable.
The Bank is slated to make their next rate announcement on October 19, 2016. The final Monetary Policy Report of the year will also be released at that time.
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