The Bank of Canada released their statement today and it’s not surprise that they have not changed the overnight rate. The rate which currently rests at 1.75% has remained unchanged since October. The Bank had been gradually increasing interest rates but stopped when they saw that the economy was not performing as expected. At the end of 2018 and the start of 2019 we saw an economic slowdown which now appears to have been just a small bump in the road.
It looks like economic activity is picking up in the second quarter of the year, as projected in the Bank’s April report. Production increases in the oil sector have increased and prices have remained above recent lows. Although some areas of the housing market remain weak, as a whole the market it is growing more stable.
Exports, consumer spending, and job growth have all done well during the second quarter and business investment has firmed. However, inventories have spiked which may lead to lower production later.
The removal of tariffs on steel and aluminum as well as a potential ratification of CUSMA is good for Canadian exports and investment. However, continually rising global trade tensions does pose a threat, specifically from China where new restrictions have directly impacted Canadian exports.
The ideal rate of inflation for a healthy economy is 2.2%. Both Core and CPI inflation rates are expected to remain at 2% over the coming months and therefore the Bank has decided that the current interest rates remain appropriate. However, they will look for signs of growth and readiness through developments in household spending, oil markets and global trade.
To find out how this information might affect your mortgage rate, please contact us.