The Bank of Canada makes no changes to the key interest rate
Bank of Canada Interest Rate Announcements are starting to sound like a broken record. In a move, that no one considers shocking, the BoC Governor Mark Carney, announced today that the key interest rate will remain at 1.00%. Also referred to as the target for the overnight rate, the key interest rate has remained unchanged at 1.00% for nearly two years.
According to some notable financial personalities, future Interest Rate Announcements over the next five to twelve months will look much the same. Mark Chandler of RBC Dominion Securities says, “Global headwinds have pushed [interest rate hikes] to the sidelines in the near term and we do not anticipate that they will make their first move for another eight months or so.” Some of Canada’s biggest banks have echoed similar statements. As reported in our Monday Mortgage Update earlier this month, Scotiabank, BMO and TD Bank expect a Bank of Canada interest rate hike some time in the middle of 2013 (see chart below). If their forecast holds true, mortgage interest rates should remain historically low in the short term.
On why the central bank won’t raise their benchmark rate in the near future, chief economist for BMO states, “The main argument for the Bank of Canada to raise interest rates would be to cool the housing market and consumer borrowing. These new mortgage rules will do that job.” The new mortgage rules have been in effect since July 9th, 2012.
Some notes from the press release:
“While global headwinds are restraining Canadian economic activity, domestic factors are expected to support moderate growth in Canada…Consumption and business investment are expected to be the primary drivers of growth, reflecting very stimulative domestic financial conditions. However, their pace will be influenced by external headwinds, notably the effects of lower commodity prices on Canadian incomes and wealth, as well as by record-high household debt. Housing activity is expected to slow from record levels.”
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