Bank of Canada Rate Annoucement - January 9, 2019
January 9, 2019 | Posted by: Ken Fadel
The BoC kept its target for the overnight rate unchanged in the face of a new gloomier forecast that indicates the country's economy is quickly slowing down.
As was the case in December, the BoC left its key policy rate at 1.75% today as the economy absorbs the impact of lower oil prices, weaker housing activity, and the never ending U.S.-China trade dispute.
While the BoC reaffirmed its commitment to getting rates back to a neutral level (neither fueling nor constricting economic growth) it has acknowledged that the pace of rate increases is not set and will evolve with the economic outlook. As a point of reference, a neutral rate is estimated to be about 3.00%, which is 125 bps higher than its current level.
The BoC also released its 2019 Q1 forecast which was highlighted by a marked decline in economic growth. The economy is now estimated to grow just 1.7% this year, down dramatically from its previous forecast of 2.1%.
The BoC also outlined how the housing market has been “weaker than expected” due to a combination of stricter mortgage rules, new restrictions in some provinces on foreign buyers and earlier mortgage rate hikes. This is the BoC's first mention that the downturn in the real estate markets of Toronto and Vancouver may be worse than initially thought.
The next rate announcement is scheduled for March 6.