The Interest Rate Decision Bank of Canada Made This Week

The Bank of Canada met this past Wednesday to make a decision on the Prime lending rate. The Prime lending rate usually directly affects people with variable rate mortgage terms. 

Economists were factoring in a 50 to 60% chance of them lowering the rate to boost the economy; they did not. There are a number of reasons why they made the decision to keep the rate as is; one of them being the Federal Government's plan to spend billions of dollars on infrastructure to boost the economy. According to a report by here are some other reasons:


"The Central bank has released its latest rate decision.

The Bank of Canada said Wednesday it will maintain its target for the overnight rate at ½%.

“The global economy is progressing largely as the Bank anticipated in its January Monetary Policy Report. Financial market volatility, reflecting heightened concerns about economic momentum, appears to be abating,” the bank said in a release. “Although downside risks remain, the Bank still expects global growth to strengthen this year and next. Recent data indicate that the U.S. expansion remains broadly on track.

“At the same time, the low level of oil prices will continue to dampen growth in Canada and other energy-producing countries.”

The BoC also noted recent rebounds in oil and other commodities. Coupled with slight appreciation for the loonie, the central bank said economic conditions are evolving as assumed in its January policy report.

“Canada’s GDP growth in the fourth quarter was not as weak as expected, but the near-term outlook for the economy remains broadly the same as in January,” the bank said. “National employment has held up despite job losses in resource-intensive regions, and household spending continues to underpin domestic demand. Non-energy exports are gathering momentum, particularly in sectors that are sensitive to exchange rate movements.

“However, overall business investment remains very weak due to retrenchment in the resource sector.”

Overall, the bank said risks are balanced.

“The Bank’s Governing Council judges that the overall balance of risks remains within the zone for which the current stance of monetary policy is appropriate, and the target for the overnight rate remains at 1/2 per cent,” the BoC said."


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