Bank of Canada Keeps Interest Rates at 1.25%


Bank of Canada Keeps Interest Rates at 1.25%

On Wednesday, the Bank of Canada (BOC) announced they will keep key interest rates unchanged at 1.25 per cent. Since June 2017, the BOC has raised its rates three times (including their latest hike in January), in return, forcing up the rates commercial banks charge on mortgages, lines of credit, and other consumer loans.

Photo: Max Bender via Unsplash

The BOC noted that the decision to maintain its benchmark is due to recent trade policy developments that have created “thickening clouds around the outlook for the Canadian and global economies”. Currently, Canada is facing uncertainty over the fate of the North American Free Trade Agreement (NAFTA), as it continues its discussions and ongoing negotiations with the U.S. & Mexico. Last week, U.S. President Donald Trump announced plans to charge a 10 per cent tariff on steel and a 25 per cent tariff on aluminum imports; in which Canada is the largest exporter of both to the U.S. The bold move has sparked fears of a global trade war, and ignited concern for many Canadians.

In regards to the housing market, the BOC pointed out it needs more time to fully assess the impact of new mortgage guidelines and other cooling measures that were introduced earlier this year. They currently do not have enough data to evaluate whether an additional hike is needed, but this can all change on April 18, when the next meeting is scheduled. Toronto’s housing market on the other hand, is illustrating clear signs of cooling; with home sales down sharply in January and February, dropping 22 per cent and 35 per cent respectively.

Photo; Tony Yeung via Unsplash

Growth overall continues to be solid, as new government spending and previously-announced tax cuts are anticipated to boost growth this year and next. According to the news release published by the BOC, the economy grew by 3 per cent in 2017, inflation is running close to 2 per cent, and wage growth has firmed; however still remains lower than what would be typical. Economists believe there will be a few more hikes later this year, ending off the year with a potential benchmark lending rate at 1.75 per cent.



Leave a Reply

Your email address will not be published. Required fields are marked *