Bank of Canada Rate Announcement - March 7, 2018
March 7, 2018 | Posted by: Crescent Mortgage Corp.
As was expected, the BoC kept its key target for the overnight rate unchanged at 1.25% this morning. This following three rate hikes since June 2017. This apparent relaxed approach to raising interest rates is in response to potential fallout from new U.S. protectionist threats and a marked slowdown in household borrowing.
'While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accommodation will likely be needed to keep the economy operating close to potential and inflation on target,' according to a statement included in the BoC release.
This statement could is beginning to temper expectations of future rate increases. A growing number of economists are now predicting just one more hike in 2018, a significant change from the three hikes previously forecasted.
Wednesday's interest rate pause comes as U.S. President Donald Trump's threat of tariffs on steel and aluminum imports continues to spread fear of a global trade war. Canada is the largest exporter of both commodities to the U.S. and has vowed to retaliate if the tariffs become a reality. Add to this the uncertainty surrounding the status of NAFTA and the Bank had no choice but to acknowledge the potential impacts stating 'Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.”
The other focus point for the BoC remains the housing sector, most notably in Ontario and B.C. as increasing interest rates and new policy measures have cooled housing activity with household credit growth decelerating each of the last 3 months of 2017. The bank has noted that it will take some time to fully assess the effects of these policy changes introduced at both the federal and provincial levels.