Bank of Canada Interest Rate Announcement: March 6, 2013

Alyssa Furtado
by Alyssa Furtado March 6, 2013 / 2 Comments

For the 30th consecutive month, the Bank of Canada (BoC) has decided to leave the overnight lending rate at 1.00 per cent.

As the central bank’s governor Mark Carney gets ready for his departure from Canada, all eyes (and markets) are watching his final moves. While Carney has indicated the next move for the central bank will be to increase rates, the answer to “When?” is still uncertain. With the economy continuing to show only moderate growth, and the “muted outlook for inflation,” Carney has to consider what effect an increase would have in all markets and take action that won’t hurt the economy as a whole.

The overnight lending rate is important to Canadian mortgage holders, specifically those with variable rate mortgages, because of the trickle-down effect it can have on individual lenders. For example, if Carney had increased the overnight lending rate by 0.25 per cent, the banks would likely increase their Prime rates by 0.25 per cent shortly after. For anyone with a variable rate mortgage, an increase to Prime would result in an increase to their mortgage rate.

With only a few months left in Canada, the question now is whether or not Carney will change the key interest rate before heading over to England. The answer seems to be “unlikely”. Analysts and economists are now predicting for an increase rate hike sometime between late-2013 and mid-2014.

The last time the overnight lending rate was changed was September 8, 2010, when it was increased from 0.75 to 1.00 per cent. The next scheduled interest rate announcement is April 17, 2013.

Source: Bank of Canada – Interest Rate Announcement – March 6, 2013


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