In their statement released today the Bank of Canada announced that there is no change to their overnight rate which presently sits at 1.75%, unchanged for the last seven months. The Bank had originally started a planned gradual climb in interest rates but had to hit pause when the economic climate couldn’t handle additional increases. For this same reason the Bank has once again stalled an interest rate hike.
The end of 2018 and the start of 2019 showed a slowed down in the economy but it now appears to have been just a temporary blip. Activity has been picking up through the second quarter, as projected in the Banks April report. Some sections of the housing market have remained weak but as a whole the market has been growing increasingly stable. The oil sector has seen production increases and prices have remained above recent lows.
Job growth, consumer spending, and exports have all been on the rise this quarter. Business investment has firmed but excess inventories may stall production in the near future.
The impending ratification of CUSMA as well as the removal of tariffs on aluminum and steel are good news for Canadian investment and exports. However, continued world trade tensions are impacting the Canadian market. Specifically, new restrictions out of China have taken a toll on Canadian exports.
Ideally, Canada wants to see an inflation rate of 2.2% for ideal growth conditions. However, it is projected that we will see Core and CPI inflation rates of 2% over the coming months. For this reason the Bank has chosen to forego any immediate interest rate hikes but will keep a weather eye on household spending, oil markets, and global trade for signs of change.
To learn how this may impact your mortgage please contact us.