The Central Bank announced Wednesday it is maintaining its target for the overnight rate at 1.75%, citing uncertainty around the energy and housing markets as reasons for standing pat.
“The Bank of Canada’s interest rate announcement contained a mixed bag of positive indicators, including a 40-year low in unemployment and strong economic performance in most sectors other than energy and housing,” James Laird, president of CanWise Financial, said. “The energy sector has been a concern for the Bank for some time now, but there seems to be a new focus on the housing sector, especially on the impact of mortgage guidelines changes and the five rate increases that have happened in the past 18 months.”
Still, the Canadian economy has been performing “well overall,” according to the Bank.
Growth is performing at close to its potential, unemployment is at a 40-year low, and employment has seen strong growth.
The BoC predicts real GDP will grow 0.4 percentage points slower than previously predicted, however.
Looking forward, the Bank said interest rates will require hikes over time. The pace of that increase will depend on how the economic outlook evolves, as well as how the energy and housing markets develop.
In the meantime, homeowners and prospective buyers should closely watch mortgage rates for any fluctuations.
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“The Bank of Canada is still targeting increases in the key overnight rate, but the pace and frequency of these rate adjustments will be moderated based on the health of Canada’s energy and housing sectors,” Laird said.
“The Bank’s moderated outlook in the last two announcements has caused bond yields in Canada to drop lower than any point in 2018,” he continued. “However, we are yet to see a corresponding decrease in mortgage rates. We would advise consumers to keep a close eye on mortgage rates in the coming weeks.”