Prime Rate Canada – Bank of Canada Rate Announcement

The latest news from the Bank of Canada (no surprise) is that the overnight interest rate will stay at 1%. The news release follows and is also available at Bank of Canada News

“Inflation in Canada remains low. Core inflation is expected to stay well below 2 per cent this year due to the effects of economic slack and heightened retail competition, and these effects will persist until early 2016. However, higher consumer energy prices and the lower Canadian dollar will exert temporary upward pressure on total CPI inflation, pushing it closer to the 2 per cent target in the coming quarters. We expect total CPI inflation will remain close to target throughout the projection, even as upward pressure from energy prices dissipates, because the impact of retail competition will gradually fade and excess capacity will be absorbed.

The global economic expansion is expected to strengthen over the next three years as headwinds that have been restraining activity dissipate. The economic recovery in the United States appears to be on track, despite soft readings in the last few months largely due to unusual weather. Indeed, private demand could turn out to be stronger than anticipated. Europe’s economy is growing modestly, but inflation remains too low and the nascent recovery could be undermined by risks emanating from the Russia-Ukraine situation. In China and other emerging-market economies growth is expected to be solid, although there are growing concerns about financial vulnerabilities. Overall, global growth is expected to pick up to 3.3 per cent in 2014 and increase further to 3.7 per cent in 2015 and 2016 – largely unchanged from the January Monetary Policy Report (MPR).

The Bank continues to expect Canada’s real GDP growth to average about 2 1/2 per cent in 2014 and 2015 before easing to around the 2 per cent growth rate of the economy’s potential in 2016. Competitiveness challenges continue to weigh on Canadian exporters’ ability to benefit from stronger growth abroad. However, a range of export subsectors have been growing in line with fundamentals, which suggests that as the U.S. recovery gathers momentum and becomes more broadly-based, many of our exports will benefit. The lower Canadian dollar should provide additional support. We continue to believe that rising global demand for Canadian goods and services, combined with the assumed high level of oil prices, will stimulate business investment in Canada and shift the economy to a more sustainable growth track.

Recent developments are in line with the Bank’s expectation of a soft landing in the housing market and stabilizing debt-to-income ratios for households. Still, household imbalances remain elevated and would pose a significant risk should economic conditions deteriorate.

In sum, the Bank continues to see a gradual strengthening in the fundamental drivers of growth and inflation in Canada. This view hinges critically on the projected upturn in exports and investment. With underlying inflation expected to remain below target for some time, the downside risks to inflation remain important. At the same time, the risks associated with household imbalances remain elevated. The Bank judges that the balance of these risks remains within the zone for which the current stance of monetary policy is appropriate and therefore has decided to maintain the target for the overnight rate at 1 per cent. The timing and direction of the next change to the policy rate will depend on how new information influences the balance of risks.”

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Posted by Prime Rate Guy - May 1, 2014 at 9:48 am

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New Mortgage Calculators

We’ve added a couple of new mortgage calculators to our site.  You can use them to determine how much you can safely borrow towards a mortage and to determine how much CMHC insurance you’ll have to pay if you choose that option. Check them out here:

Mortgage Affordability Calculator

CMHC Insurance Calculator

 

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Posted by Prime Rate Guy - November 19, 2013 at 3:08 pm

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Bank of Canada Rate Stays at 1%, Again.

Here is the latest news on the Bank of Canada interest rate:

September 4, 2013 Ottawa -

The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economy continues to expand broadly as expected, but its dynamic has moderated. In the United States, the process of normalization of long-term interest rates has begun in the context of stronger private domestic demand. Recent data, however, point to slightly less momentum overall than anticipated. In Europe, there are early signs of a recovery, and Japan’s situation remains promising. In a number of emerging market economies, financial volatility has increased, adding uncertainty to growth prospects, although China continues to grow at a solid pace. Commodity prices have been relatively stable, with geopolitical stresses putting some upward pressure on global oil prices.

Uncertain global economic conditions appear to be delaying the anticipated rotation of demand in Canada towards exports and investment. While the housing sector has been slightly stronger than anticipated, household credit growth has continued to slow and mortgage interest rates are higher, pointing to a continued constructive evolution of household imbalances. Looking through the choppiness of the recent data, the level of Canada’s GDP is largely consistent with the Bank’s July forecast. The output gap is expected to begin to narrow in 2014.

Inflation in Canada remains subdued. With inflation expectations well-anchored, both core and total CPI inflation are expected to return slowly to 2 per cent as the output gap closes.

Against this backdrop, the Bank has decided to maintain the target for the overnight rate at 1 per cent.  As long as there is significant slack in the Canadian economy, the inflation outlook remains muted, and imbalances in the household sector continue to evolve constructively, the considerable monetary policy stimulus currently in place will remain appropriate. Over time, as the normalization of these conditions unfolds, a gradual normalization of policy interest rates can also be expected, consistent with achieving the 2 per cent inflation target.

Full story

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Posted by Prime Rate Guy - September 4, 2013 at 12:20 pm

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Bank of Canada Leaves Interest Rate at 1%

The Bank of Canada has left the benchmark interest rate at 1%.  The slow rate of economic growth was the main factor in leaving the rate at the current level.  According to the bank, “The considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required.”

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Posted by Prime Rate Guy - March 6, 2013 at 10:42 am

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Bank of Canada Interest Rate Announcement Schedule 2013

Here is the Bank of Canada Interest Rate Announcement Schedule for 2013.

January 23
March 6
April 17
May 29
July 17
September 4
October 23
December 4

More details at Bank of Canada

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Posted by Prime Rate Guy - January 17, 2013 at 11:28 am

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Key Interest Rate Remains at 1%

The Bank of Canada has left the key interest rate at 1%. The Bank stated that while the U.S. economy was starting to expand, there is still continued contraction in Europe and China’s growth was slowing more than expected.

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Posted by Prime Rate Guy - October 23, 2012 at 12:18 pm

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