Mortgage Blog

Bank of Canada Rate Announcement - October 25, 2017

October 25, 2017 | Posted by: Crescent Mortgage Corp.

The BoC left its benchmark target interest rate unchanged today after two straight hikes, but did suggest that future “gradual” increases are still likely.

In its announcement, the BoC stated no change was made in part due to its expectation that the recent strength of the Canadian dollar will reduce inflation pressures.  They also identified the substantial, persistent unknowns surrounding geopolitical developments and the renegotiation of the North American Free Trade Agreement.

The BoC cautioned that it expects to remain on a rate-hiking path, albeit at perhaps a more measured pace. ``While less monetary policy stimulus will likely be required over time, governing council will be cautious in making future adjustments to the policy rate,'' the BoC said in a statement.

The BoC stressed it will pay particular attention to the unfolding impact of higher interest rates and the evolution of capacity, wage growth and inflation.

Updated projections were also released today forecasting economic growth to moderate over the next couple of years, dropping from its 3.1 % pace this year to 2.1% for 2018 and 1.5% in 2019.  ``Real GDP growth is expected to moderate to a still-solid pace close to two per cent ... over the second half of the year,'' the bank said.

The BoC is also predicting a decline in the contributions from residential investment and consumption, which have been key components of the country’s growth spurt. These changes are assumed to be consequences of higher borrowing rates, higher household indebtedness and newly introduced policy measures aimed at cooling real estate markets.  More specifically, the BoC expects that the guidelines recently announced by OSFI (which take effect on January 1st ) to reduce GDP by 0.2% by the end of 2019.

The next BoC rate announcement is set for Dec. 6.

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