In a widely anticipated move, the Bank of Canada holds its rate steady at 1.75%, citing the economic slowdown in late 2018 and early 2019. This marks the fifth consecutive time that the Bank has maintained its key rate, since raising it last October. In its last overnight rate announcement, the Bank cited a slowing global economy, but forecasted a pick-up in activity later this year. This sentiment was echoed in today’s decision.
“Accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter,” according to the Bank’s press release. “The oil sector is beginning to recover as production increases and prices remain above recent lows. Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions.
Continued strong job growth suggests that businesses see the weakness in the past two quarters as temporary. Recent data support a pickup in both consumer spending and exports in the second quarter, and it appears that overall growth in business investment has firmed. That said, inventories rose sharply in the first quarter, which may dampen production growth in coming months.
The global economy is also evolving largely as expected since April, although the recent escalation of trade conflicts is heightening uncertainty about economic prospects. In addition, trade restrictions introduced by China are having direct effects on Canadian exports. In contrast, the removal of steel and aluminum tariffs and increasing prospects for the ratification of CUSMA will have positive implications for Canadian exports and investment.
Inflation has evolved in line with the Bank’s April projection. The Bank expects CPI inflation to remain around the 2 per cent target in the coming months. Core inflation measures all remain close to 2 per cent.”
Changes in the Bank’s rate impacts the interest rates offered by retail banks, on savings and loans products such as certain types of investments, savings accounts, home equity lines of credit and variable-rate mortgages. You’ll also want to keep an eye on the Bank’s interest rate announcements if your mortgage is up for renewal.
“The economy is in recovery mode, which means if the Bank were to make a move, it’s more likely to drop rates rather than raise them anytime soon,” says Christopher Alexander, Executive Vice-President and Regional Director at RE/MAX of Ontario-Atlantic Region. “This is good news for new homebuyers trying to get their foot into Canada’s housing markets, and for current homeowners with mortgages up for renewal in the next year. Now is also a good time to pay down debt and put a dent in those high consumer debt levels, which are of concern in Canada.”
The Bank’s next interest rate announcement is scheduled for July 10, 2019.