BoC Leaves Key Rate Alone Again

The Bank of Canada (BoC) yesterday announced no change in their Key Overnight Lending Rate again.  This is the rate that banks use to settle accounts daily and the rate that Canadian Prime is based upon.  The last change in the Key Rate was July 2015 when the rate dropped to its current level of 0.5%.

The BoC noted higher energy prices, due in part to carbon pricing introduced in two provinces, has caused inflation to rise to 2.1%.  They see this as temporary and continue to see material excess capacity in the economy which will mitigate any inflationary effects.

The BoC states: "exports continue to face the ongoing competitiveness challenges...While there have been recent gains in employment, subdued growth in wages and hours worked continue to reflect persistent economic slack in Canada, in contrast to the United States."

Currently there remains no indication that interest rates will do anything but remain at current levels and may even need to drop further to assist the economy, especially in light of continued tightening of mortgage underwriting rules & guidelines.