Bank of Canada Rate Announcement - December 6, 2017
December 6, 2017 | Posted by: Crescent Mortgage Corp.
The Bank of Canada kept its target for the overnight rate steady today at 1.00%, but it highlighted cautious warnings to Canadians that increases are probably upcoming. In its announcement, the BoC identified several recent indicators that could point to higher rates in the coming months. These included positive job and wage growth, strengthening business investment and the resolve of the consumer. In addition, data is starting to show the benefits from government infrastructure investments have begun to work their way through the economy. Having said that, the BoC also pointed out that exports have dropped more than expected in recent months and uncertainty continues in the international arena due to geopolitical and trade-related factors.
The BoC stated inflation has been slightly higher than anticipated and could remain at that level for the short term due to temporary factors such as higher gas prices. Core inflation, which omits the impact of the volatile pricing nature of items such as gasoline has also continued to inch upwards. Rates were increased in both July and September by the BoC in response to an impressive economic run that began in late 2016. Going forward, the trick is determining how to proceed with rates while taking into account the indebtedness of Canadian households and the still-hot housing markets in areas like Toronto and Vancouver.
``While higher interest rates will likely be required over time, (the bank's) governing council will continue to be cautious,'' and be ``guided by incoming data in assessing the economy's sensitivity to interest rates, the evolution of economic capacity and the dynamics of both wage growth and inflation.'' The BoC statement also revealed that recent economic indicators have been in line with their latest forecast which foresaw a moderation in output following the country's extraordinary growth in the first half of the year.