The Bank of Canada almost cut its Key Rate today.
Today the Bank of Canada has announced that it will leave their Key (overnight lending) rate alone at 0.5%. The BoC has also changed their growth projections for the Canadian economy. The last time that the BoC changed the Key overnight rate was July 15, 2015.
The US economy continues to regain momentum, the same can’t be said for the Canadian economy. The Canadian economy is dragging primarily due to: lower exports and an aging population. The BoC predicts Canada’s real GDP will grow by only 1.1% this year (down from its prediction of 1.3% in July), and 2% next year (down from 2.2% in July).
New mortgage rules brought down by the federal government recently, play a part in the revised economic forecast. The BoC believes that the new measures will reduce risk to the financial system. Total CPI inflation is tracking slightly below expectations because of temporary weakness in prices for gasoline, food, and telecommunications, according to the BoC. The Bank expects there will be continued downward pressure into 2017 as the BoC Governor has recently stated that we are in a long term low interest rate environment, and we need to get used of it.
Feel free to contact us on further discussion of the economy or the recent Canadian mortgage rule changes.