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Bank of Canada Interest Rate Announcement: September 5, 2012

The Bank of Canada governor Mark Carney has announced that no changes will be made to the Bank of Canada interest rate. As many economists predicted, the key interest rate shall remain at 1.0 per cent, where it has been since September 8th, 2010.

The Canadian economy is currently growing at a 1.8 per cent annualized rate which, although not great, is considered good relative to the economic expansion in the U.S., which continues at a gradual pace, and the recession in Europe. How these two large economies deal with policy in the future will weigh heavily on the future of Mark Carney’s interest rate decisions. According to a report by TD Bank chief economist Craig Alexander, the influence of the global economic landscape is more important [to interest rates in Canada] than anything that is happening [in Canada].

Overall, global headwinds continue to narrow economic activity in Canada, forcing the central bank to keep interest rates unchanged for the time being. However, according to Mark Carney, “Economic growth is expected to pick up through 2013, with consumption and business investment continuing to be its principal drivers.” He also noted that there are signs of slowing household spending, albeit “the household debt burden continues to rise.” Could this be a sign of an upcoming Bank of Canada interest rate hike? Only time will tell. 


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