Today, The Bank of Canada (BoC) announced it would be maintaining its target for the overnight rate at 1 ¾ %.
The Bank Rate is currently at 2% and the deposit rate is 1 ½ %.
Which factors influence the overnight rate?
Trade conflicts are impacting global demand more heavily than expected. Growth in major advanced economies has slowed, although activity in the United States remains above average.
Oil prices have fallen sharply since the October Monetary Policy Report (MPR). This reflects uncertainty about global growth prospects, and expansion of U.S oil production.
The Canadian economy grew in line with the Bank’s projection in the third quarter. There has been less momentum in the fourth quarter, due to a drop in business investment in the energy sector.
Household credit and regional housing markets appear to be stabilizing following a significant slowdown in 2018. BOC continues to monitor the impact of rising rates and tighter mortgage rules on builders and buyers.
Inflation has been growing as expected – Bank’s core measures are all tracking 2%.
In light of all these developments, Governing Council continues to judge that the policy interest rate needs to rise into a neutral range to achieve the inflation target. The effect of higher interest rates on consumption and housing will impact the rate at which it continues to rise.
Global trade policy developments and the persistence of the oil price shock will also contribute to the BoC’s future decisions .
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