Today the Bank of Canada (BoC) announced that it will be leaving its key rate unchanged at 1.25%. Canadian financial institutions are expected to follow suit and leave their Prime rate of lending at 3.45%
Contrary to previous thinking; BoC is not raising rates at the pace they were expecting to. Hesitation has been caused by the Canadian economy not performing in the first quarter of 2018 as the BoC forecasted. Corporate tax decreases in the U.S. and difficult trade talks have cast a shadow on the prospects for the Canadian economy. A housing market that has slowed down across the country, likely caused by the latest mortgage rule changes, has certainly contributed to the economic slowdown. Inflation is also at the BoC’s target rate of 2%, which cancels the need for any rate change.
The BoC suggested rate hikes may be needed down the road, but other noted economists and investors foresee possible recessionary environment near the end of 2018, early 2019.