Bank of Canada Rate Announcement - April 12, 2017
April 12, 2017 | Posted by: Crescent Mortgage Corp.
As expected, the overnight rate was kept unchanged at 0.5% by the BoC. It has remained at this level since July of 2015.
However more importantly, the Bank has signaled that its first interest rate hike since September 2010 could come as soon as the first half of 2018 as the Canadian economy continues to grow faster than expected. It revised its forecast for GDP growth for 2017 upwards to 2.6%, up 0.5% from its January estimate. Employment growth, higher consumer spending and the GTA housing market were all emphasized as drivers. The BoC went even further with its discussion of the red-hot Toronto market stating “Price growth in the [Greater Toronto Area] has accelerated and seems to have entered a phase in which speculation is playing a larger role.”
One thing to note is that the Bank’s improved outlook is clouded with several uncertainties including the belief that a portion of the economy’s fast start this year may be temporary in nature and that global protectionism will play a large part in its growth going forward. A number of potential threats in the U.S. face Canada including pending tariffs, a proposed border tax, “Buy American” restrictions and the renegotiation of the North American free trade agreement (NAFTA). All of which are putting a crimp on business investment in this country. As a result, the Bank’s latest estimates for 2018 and 2019 show economic growth slowing significantly to 1.9% and 1.8 % respectively.