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?
As expected, the BoC held their key interest rate steady at 1.75 percent today. The bank had previously suggested that we could see some rate hikes in the near future, however talk of an impending increase was noticeably missing from their policy discussion today. Subsequently, homeowners holding a variable rate mortgage are not likely to see an increase in their mortgage payments at this time.
What Information did the Bank Share about the Canadian Economy?
Within the energy sector, we are still seeing the effects of last years drop in oil prices. The bank also cited that “ongoing transportation constraints have curbed investment and exports.” Outside of this sector, investment and exports have been weighed down by “trade policy uncertainty and the global slowdown.” Growth from government spending has been stalled by Ontario’s new budget.
At this time, GDP growth is projected at 1.2 percent for the remainder of the year, and is expected to increase to about 2 percent for 2020 and 2021. Economic growth is also set to pick up starting in the second quarter of this year. In particular:
- Housing activity should stabilize
- Consumption will be supported by “strong growth in employment income;” and
- Growth in investment and export expansion is expected
CPI inflation is currently sitting close to 2 percent, with a temporary decrease projected in the third quarter. It is expected to return close to the 2 percent target by the end of the year where it should remain stable for 2020 and 2021.
You can find an in-depth look at the bank’s assessment of the economy in their Monetary Policy Report, which was released today alongside the rate announcement.
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 between 2.5 and 3.5 percent. Canadian Economists suggest that the rate is likely on hold for at least the remainder of 2019. The next policy rate announcement is set to be released on May 29, 2019.
How Can I Learn More?
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