Mortgage Logic

Bank of Canada Summer 2011

Not Changing Key Rate For Awhile

The Bank of Canada (BoC) this summer decided to leave their key overnight lending rate alone at 1%, and thus leaving the Canadian Prime Rate at 3%. BoC is between a rock and a hard place: concerned about curbing Canada's economic expansion (which has been hit by the slowdown in US) by raising the key rate and thus strengthening currency, yet concerned with some signs of the inflation rate potentially increasing - which would require them to raise rates. The short and medium term perspective continues to bode well for rates remaining low as long as inflationary pressures stay in check. The mess in US may increase bond rates over time there, indirectly pressing up Canadian bond rates also. This could become an issue if the US government does not get their fiscal house in order sooner as opposed to later.

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