Graham Ogden

B Comm and Realtor®

Direct: 1 780 908-1224 |

Interest Rate Update January 18, 2017

The Bank of Canada announced today that it is holding the benchmark interest rate unchanged at 0.5% with an optimistic outlook, noting that “federal and provincial measures are still expected to support growth in 2017” and predicting “a return to full capacity around mid-2018” as earlier projected in October. The Bank factored in Trump’s tax policies i.e. stimulus spending, resulting “in a modest upward revision to its U.S. growth outlook” which should benefit Canada. The Bank did not take into account U.S. policy changes that could negatively impact us, noting that there are “significant uncertainties weighing on the outlook".

 

Last fall, the Ministry of Finance introduced four new mortgage tightening measures intended to cool the housing markets (aimed primarily at Vancouver and Toronto), reduce foreign investor home flipping, and control the levels of Canadian household debt. The Ministry also introduced risk sharing on mortgages for the Chartered Banks which puts upward pressure on mortgage rates as lenders need to set aside higher levels of capital for certain types of funds.

 

The Central Bank predicts for 2017 that it expects oil prices and the Canadian dollar to stay close to the $50 US for a barrel of crude (currently around $52.48 US per barrel at January 17th), and 75 cents US for the Canadian dollar (currently at 77 cents US at January 17th). Low interest rates help keep the Canadian dollar low which in turn aids our export market, however global demand for our products has stalled. The European Union members' debt crisis, global oil-price collapse, and Brexit have undermined markets and consumer confidence. In addition, the uncertainty over our trade position with the U.S. as a result of the U.S. election is expected to delay capital spending and business investment in Canada.

Comments:
No comments

Post Your Comment:

Today’s Bank of Canada rate hold announcement marks almost four straight years that the key benchmark rate has remained unchanged, since September 8, 2010. Great news if you have a variable-rate mortgage or home equity line of credit; the prime rate stays at 3%.

 

The announcement noted that “the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished.” With these considerations, the Bank is maintaining its monetary policy stimulus, and remains neutral with respect to the timing and direction of the next change.

 

The next rate-setting day is October 22nd.

Copyright 2018 by the REALTORS® Association of Edmonton. All Rights Reserved.
Data is deemed reliable but is not guaranteed accurate by the REALTORS® Association of Edmonton.