Bank of Canada changes its thoughts from higher rate to lower rate
Today the Bank of Canada (BoC), on their scheduled announcement date, decided to leave their key rate and not change it. They made it clear that there are no more thoughts of raising the rate this year. After taking stock of the past six months in the Canadian economy, they have no choice but to drop their bias for raising the key rate, and begin a watch to potentially cut it. They had predicted in October that the economy would be growing at a rate of 2.3% (4th quarter 2018) & 1.3% (1st quarter of 2019), instead, it grew at 0.4% in the last quarter of 2018 and 0.3% in the first quarter of 2019.
Accordingly, the BoC’s key rate will remain at 1.75% and major FI prime rates will likely stay at 3.95%.
The major factors causing this updated thinking by the BoC are:
– Global economic slowdown continues
– Lower than world oil prices available for Canadian crude because of U.S. oil self-sufficiency.
– Slower housing market & consumer spending
– Uncertainty being created by recent trade talks and tariffs applied
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