Bank of Canada Announcement - September 4, 2019

Posted on 04 September, 2019

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?

There was no change to the central bank’s benchmark interest rate this morning, which marks one year since an adjustment has been made. The decision to hold the rate steady at 1.75 percent came with a downgraded outlook from July’s Monetary Policy Report (MPR).

What Information did the Bank Share about the Canadian Economy?

The bank cited three factors in their newly downgraded outlook, including:

  • Weakened business investment
  • An escalation of the US-China trade conflict; and
  • A decline in world trade

A number of economies - Canada included - are currently seeing an inverted yield curve. Inverted yield curves occur when the rate of government bonds are lower than the overnight lending rate. Our recent blog details the underlying factors behind an inverted curve and what that means for the mortgage industry.

Second-quarter growth, on the other hand, was stronger than projected in July’s MPR. In particular, Canada saw:

  • Stronger energy production
  • Growth in exports; and
  • Recovering strength in the housing market, due in part to the recent dip in mortgage rates

Despite this strength within the Canadian economy, economic activity is projected to slow down in the latter half of 2019 due to the increase in global trade uncertainty.

Inflation is currently sitting at the 2 percent target.

Will there be any Interest Rate Changes in the Near Future?

The central bank always aims to set its rate within neutral range, which remains between 2.25 and 3.25 percent. Governing Council is paying particular attention to global developments in determining future changes to their benchmark rate. The bank’s next rate announcement is set to be released alongside the next MPR on October 30, 2019. The possibility of a rate cut at that time is currently sitting at 50 percent.

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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