Bank of Canada Rate Announcement January 2020

The Bank of Canada (BoC) today announced that it will not be making any changes at this time to their key rate, which directly affects the prime rate of interest with major financial institutions.

They have cut their growth forecast to 1.3% from 1.7% for Q1 2020. Consumer spending and confidence is unexpectedly weak. BoC is now keeping an eye on this economic slowdown to see how deep it may be. The output gap has widened meaning that the economy has capacity to produce more, while inflation is under control within their acceptable range.

It has been well over a year since the BoC has made a change to their key rate (October 2018). With international trade tensions abating, there should be more stability in the global market ahead. We believe that the BoC is hoping that they will not have to cut their key rate going forward, however will have to if domestic economic stats continue downward. The Canadian economy is not following the positive lead of healthy U.S. economic growth mainly because of divergent tax policies between the two countries, and the ages old productivity gap between them.