The Bank of Canada announced this week that they’re keeping their overnight rate target at 1.75%.
The bank considers the global economy to be moderate:
The global economic expansion continues to moderate, with growth forecast to slow to 3.4 per cent in 2019 from 3.7 per cent in 2018. In particular, growth in the United States remains solid but is expected to slow to a more sustainable pace through 2019. However, there are increasing signs that the US-China trade conflict is weighing on global demand and commodity prices.
The bank considers Canada’s economy to be performing relatively well, despite negativity in the Alberta energy sector
The drop in global oil prices has a material impact on the Canadian outlook, resulting in lower terms of trade and national income. As well, transportation constraints and rising production have combined to push up oil inventories in the west and exert even more downward pressure on Canadian benchmark prices. While price differentials have narrowed in recent weeks following announced mandatory production cuts in Alberta, investment in Canada’s oil sector is projected to weaken further.
These developments are occurring in the context of a Canadian economy that has been performing well overall. Growth has been running close to potential, employment growth has been strong, and unemployment is at a 40-year low. Looking ahead, exports and non-energy investment are projected to grow solidly, supported by foreign demand, the CUSMA, the lower Canadian dollar, and federal tax measures targeted at investment.
Unfortunately, the housing market isn’t doing as well as they had hoped it would:
Meanwhile, consumption spending and housing investment have been weaker than expected as housing markets adjust to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces. The Bank will continue to monitor these adjustments.
The bank predicts that real GDP will grow by only 1.7% this year, down 0.4 point over October.
Holding the rate where it was means that the prime lending rate for consumers is still at 3.95%. It’s under 4%, but it’s gone up 5 times since 2017. If you’re in a variable rate mortgage, you’re fine for the moment, but that could change in the coming months.
If you want to know what options are available or want to find the best rate for you today, contact our office. The next rate announcement will be 6 March 2019.