It’s been seven months since the Bank of Canada changed their benchmark rate and it’ll be at least another two more before we chance seeing a change. The rate was last increased in October 2018 and the Bank of Canada won’t meet again to discuss the overnight rate until July this year.
In 2017 the Bank had begun steadily increasing rates. At first they were pretty guarded about their intentions but as time went along they became more and more open about their plans to make continued hikes. However, the domestic and global economic climates both took a turn and the Bank was forced to call an all-stop to the consecutive hikes.
There was no news in the Bank’s statement today, at least not for the reasons we aren’t seeing a change to the overnight rate. Global trade tensions and a sluggish Canadian economy. However, the slowdown we saw at the end of the year and carried over to the start of 2019 seems to be just a dip in the road. Growth appears to be back on the rise, as predicted in the Bank’s April report.
A lot of good is happening. Job growth, exports, and consumer spending have all picked up during the second quarter of the year. The oil sector has seen an increase in production and prices have stayed above recent lows. Business investment has firmed and most of the housing market has stabilised. The recent removal of tariffs on steel and aluminium will have a positive impact on Canadian investments and exports, as will the ratification of CUSMA.
However, there are still some hangups. The recent spike in inventories may lead to a decrease in production in the coming months, parts of the housing market remain weak, and new restrictions in China are directly impacting Canadian exports.
The Core and CPI inflation rates are both expected to remain at about 2% in the coming month, 0.2% below optimal rates. The Bank will continue to observe conditions at home and abroad before they decide to make changes. In other words, they’re not going to bump up rates until they feel confident the country can handle the increase.
For more information on how this impacts your mortgage please contact us.