Earlier this week, the Bank of Canada sidestepped a cut to its key overnight rate, keeping it at 0.5%.
Even thought there has been a stronger-than-expected run in the economic data, the Bank isn’t convinced that the economy has yet shown it has what it takes to stick to the higher growth that economists were predicting in the first quarter of 2017.
Growth was temporarily boosted by a resumption of spending in the oil and gas sector and the effects of the Canada Child Benefit on consumer spending. Residential investment has also been stronger than expected. Employment data have been robust, although gains in hours worked are still soft. Meanwhile, export growth has been uneven in the face of ongoing competitiveness challenges. Further, despite a recent uptick in sentiment, business investment remains well below what could be expected at this stage in the recovery.
It’s also concerned about several economic uncertainties, including the unknown impacts of the economic agenda of the new United States administration.
In the United States, some temporary factors weighed on economic activity in the first quarter but the drivers of growth remain solid. The US is close to full employment, unlike many other advanced economies, including Canada, where material slack remains.
The Bank of Canada predicts that economic growth in Canada will moderate but remain above potential for the next two years, with real GDP growth sitting at about 2.5% this year and just under 2% for next year and 2019.
The good news is that as a homeowner (or a potential homeowner), you can take advantage of these low rates to save money and buy the house of your dreams, or perhaps refinance an existing mortgage to lower a rate that is too high. Contact us today to get these low rates working for you.