The Bank of Canada announced this week that they’re keeping their overnight rate target at 1.75%.
According to the bank, the global economy has grown slower than it had predicted in January, mostly because of trade conflicts between countries. That being said, they expect the economy to pick up somewhat throughout 2019:
Global economic activity is expected to pick up during 2019 and average 3 ¼ per cent over the projection period, supported by accommodative financial conditions and as a number of temporary factors weighing on growth fade. This is roughly in line with the global economy’s potential and a modest downgrade to the Bank’s January projection.
Canadian economic growth was also slower than the bank had predicted back in January.
Last year’s oil price decline and ongoing transportation constraints have curbed investment and exports in the energy sector. Investment and exports outside the energy sector, meanwhile, have been negatively affected by trade policy uncertainty and the global slowdown. Weaker-than-anticipated housing and consumption also contributed to slower growth.
As with the global economy, the Bank of Canada expects the Canadian economy to pick up as 2019 progresses:
Consumption will be underpinned by strong growth in employment income. Outside of the oil and gas sector, investment will be supported by high rates of capacity utilization and exports will expand with strengthening global demand. Meanwhile, the contribution to growth from government spending has been revised down in light of Ontario’s new budget.
Housing activity is expected to stabilize given continued population gains, the fading effects of past housing policy changes, and improved global financial conditions.
The bank predicts that real GDP will grow by only 1.2% this year, but by 2% in each of the following 2 years. Inflation is at 2%, and the bank predicts it to remain there until at least 2021.
Holding the rate where it was means that the prime lending rate for consumers is still at 3.95%. And the bank doesn’t seem interested in increasing that for a while. If you’re in a variable rate mortgage, you’re fine for the moment. And if you’re up for renewal this year, you’ll probably be able to still lock into the low rates.
And with the recent report from the Canadian Real Estate Association that the average home price has dropped by 1.8% over the last year (2.2% in Alberta, and 4% in Calgary and Edmonton), now might be the best time to buy a new home: low interest rates and lower home prices.
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 29 May 2019.