Interest Rate Update January 2016

The Bank of Canada has kept the overnight rate target at 0.5% There was a lot of speculation that the bank would lower the rate today. That was not the case.

See the full story at Bank of Canada



“Inflation in Canada is evolving broadly as expected. Total CPI inflation remains near the bottom of the Bank’s target range as the disinflationary effects of economic slack and low consumer energy prices are only partially offset by the inflationary impact of the lower Canadian dollar on the prices of imported goods. As all of these factors dissipate, the Bank expects inflation will rise to about 2 per cent by early 2017. Measures of core inflation should remain close to 2 per cent.

The dynamics of the global economy are broadly as anticipated in the Bank’s October Monetary Policy Report (MPR), with diverging economic prospects and shifting terms of trade. China continues its transition to a more sustainable growth path and the expansion in the United States is on track, despite temporary weakness in the fourth quarter of 2015. The U.S. Federal Reserve has begun to gradually withdraw its exceptional monetary stimulus. While risks to the world outlook remain and have been reflected in sharp price movements in a range of asset classes, global growth is expected to trend upwards beginning in 2016.

Prices for oil and other commodities have declined further and this represents a setback for the Canadian economy. GDP growth likely stalled in the fourth quarter of 2015, pulled down by temporary softness in the U.S. economy, weaker business investment and several other temporary factors. The Bank now expects the economy’s return to above-potential growth to be delayed until the second quarter of 2016. The protracted process of reorientation towards non-resource activity is underway, helped by stronger U.S. demand, the lower Canadian dollar, and accommodative monetary and financial conditions.  National employment remains resilient despite job losses in the resource sector and household spending continues to expand. “

 

Read More

Interest Rate Announcement Schedule 2016

Here is a question asked often on this site:

Q: When are the Bank of Canada interest rate announcements for 2016?

A: The Bank of Canada interest rate schedule 2016 has been published (see below) and you can find out more details of the announcements at the Bank of Canada site.

January 20, 2016

March 9, 2016

April 13, 2016

May 25, 2016

July 13, 2016

September 7, 2016

October 19, 2016

December 7, 2016

Bank of Canada interest rate announcement location

Happy New Year to all readers.

Read More

September 2015 Interest Rate Announcement

The Bank of Canada has made its September 2015 interest rate announcement. The rate will remain at 0.5%

According to cbc.ca

“Economists had been expecting the bank to keep its trend-setting target for the overnight rate where it is now. A few believe, however, that another cut might be possible later in the year unless the economic picture improves.”

Full story at http://www.cbc.ca/news/business/bank-of-canada-interest-rate-1.3220395

Read More

Bank of Canada Interest Rate Cut

The Bank of Canada interest rate announcement today has lowered the overnight rate to 0.5%.

Just over 50% of analysts surveyed by Bloomberg predicted a drop of 1/4% in the Canada prime rate today.

Check back later today for any updates on Canadian mortgage rates.

From the bank of Canada:

The Bank of Canada today announced that it is lowering its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate is 1/4 per cent.

Total CPI inflation in Canada has been around 1 per cent in recent months, reflecting year-over-year price declines for consumer energy products. Core inflation has been close to 2 per cent, with disinflationary pressures from economic slack being offset by transitory effects of the past depreciation of the Canadian dollar and some sector-specific factors. Setting aside these transitory effects, the Bank judges that the underlying trend in inflation is about 1.5 to 1.7 per cent.

Global growth faltered in early 2015, principally in the United States and China.  Recent indicators suggest a rebound in the U.S. economy in the second half of this year, and growth is expected to be solid through the projection. In contrast, China is slowing amid an ongoing process of rebalancing to a more sustainable growth path. This has pulled down prices of certain commodities that are important to Canada’s exports. Financial conditions in major economies remain very accommodative and continue to provide much-needed support to economic activity. Global growth is expected to strengthen over the second half of 2015, averaging about 3 per cent for the year, and accelerate to around 3 1/2 per cent in 2016 and 2017.

The Bank’s estimate of growth in Canada in 2015 has been marked down considerably from its April projection. The downward revision reflects further downgrades of business investment plans in the energy sector, as well as weaker-than-expected exports of non-energy commodities and non-commodities.  Real GDP is now projected to have contracted modestly in the first half of the year, resulting in higher excess capacity and additional downward pressure on inflation.

The Bank expects growth to resume in the third quarter and begin to exceed potential again in the fourth quarter, led by the non-resource sectors of Canada’s economy. Outside the energy-producing regions, consumer confidence remains high and labour markets continue to improve. This will support consumption, which will also receive a fiscal boost. Recent evidence suggests a pickup in activity and rising capacity pressures among manufacturers, particularly those exporters that are most sensitive to movements in the Canadian dollar. Financial conditions for households and businesses remain very stimulative.

The Bank now projects Canada’s real GDP will grow by just over 1 per cent in 2015 and about 2 1/2 per cent in 2016 and 2017. With this revised growth profile, the output gap is significantly larger than was expected in April, and closes somewhat later. The Bank anticipates that the economy will return to full capacity and inflation to 2 per cent on a sustained basis in the first half of 2017.

The lower outlook for Canadian growth has increased the downside risks to inflation. While vulnerabilities associated with household imbalances remain elevated and could edge higher, Canada’s economy is undergoing a significant and complex adjustment. Additional monetary stimulus is required at this time to help return the economy to full capacity and inflation sustainably to target.

 

Read More

Another Rate Cut Today?

At least one expert is warning against a cut in the Canada prime rate:

The Bank of Canada should hold off cutting interest rates to avoid sending rising home prices even higher, risking a correction later, said the head of Royal LePage, the country’s largest real estate services firm.

“It seems premature to ring the recession alarm bells now, injecting further monetary stimulus,” Phil Soper, chief executive officer of both Royal LePage and its parent company, Brookfield Real Estate Services Inc., said in a report Tuesday. “The country’s all-important real estate market simply does not need a rate cut.”

The Bank of Canada meets Wednesday, and 16 of 29 economists surveyed by Bloomberg forecast it will cut the overnight lending rate by a quarter point, to 0.5 percent. It would be the second reduction this year, pressuring Canada’s lenders to lower their own prime rates, which control the pricing of variable-rate mortgages and other loans.”

More info at Bloomberg.com

Read More

Interest Rate Announcement Today – March 4

The Bank of Canada has kept the prime rate at 0.75% This is not what most analysts were expecting at this announcement. Many had anticipated a drop to 0.5%

Excerpt:

“Total CPI inflation in Canada has fallen as expected, reflecting the significant drop in oil prices. Core inflation remains close to 2 per cent and continues to be temporarily boosted by the pass-through effects of the lower Canadian dollar, as well as sector-specific factors.

The global economy is evolving broadly in line with projections in the Bank’s January Monetary Policy Report (MPR). The United States remains the main source of momentum in the global economy, while headwinds to growth linger in many regions. In this context, a growing number of central banks have taken actions to ease monetary conditions. Crude oil prices are close to the Bank’s MPR assumptions.”

Full information here – Bank of Canada

If you enjoy these updates I’d appreciate a quick Google + (to the right) or a share on Facebook. Thanks for your support.

Read More