It wasn’t a surprise today when the Bank of Canada today announced it would maintain the target for the overnight rate at 1 1/4 percent-largely because of the uncertainty surrounding NAFTA negotiations.
The Bank said as much in its latest monetary announcement. While the Canadian economy grew by an anticipated three percent in 2017-and US government spending is expected to boost growth this year and next-Canada’s growth was slower-than-expected in the fourth quarter, and trade policy developments are creating a “growing source of uncertainty for the global and Canadian outlooks”.
The Bank also wants to take a step back to see how the previous rate increases pan out. Housing data was softer in the beginning of 2018 than a year earlier, and household credit growth has decelerated for three consecutive months. With inflation sitting around two percent, there’s no dire urgency for the Bank to hike rates, but it does acknowledge that the economic outlook is expected to warrant higher interest rates in time.
As such, “Governing Council will remain cautious in considering future policy adjustments, guided by incoming data in assessing the economy’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation”.
If you’d like to read the release in it’s entirety, you can find it here:
To learn more about what this announcement means for you-or if you have questions about whether you should go fixed or variable on your next mortgage-please don’t hesitate to drop me a line.