Interest Rate in Canada
Canada - Interest Rate
Bank of Canada leaves rates unchanged in January and strikes a more dovish tone
On 22 January, the Bank of Canada (BoC) left its target for the overnight rate unchanged at 1.75%, as had been widely expected by market analysts.
The Bank’s decision to stand pat was driven by inflation successively landing close to target, with inflation clocking in at 2.2% for the second consecutive month in December. The BoC expects price pressures to remain roughly on target in the short-term—barring some fluctuations induced by volatility in oil prices. Moreover, the Bank noted global trade tensions have thawed somewhat, but a resurgence in geopolitical risks continue to cloud the global outlook. The Bank also stressed a mixed view towards domestic economic conditions, which may be partly attributed to temporary setbacks, but “could also signal that global economic conditions have been affecting Canada’s economy to a greater extent than was predicted”.
In its communiqué, the Bank was noticeably more dovish, highlighting cautious consumers, a slowdown in job creation and tepid business investment levels. Nevertheless, strong income and population growth, as well as the federal government’s recent tax cut, should support household spending and the housing market—two pillars of the Canadian economy—this year. Overall, most of our panel still expects the Bank of Canada to cut rates at least once before the end of this year.
Commenting on January’s meeting, James Marple, a senior economist at TD economics, noted:
“Overall, this statement and forecasts are consistent with our expectation for a 25 basis point cut in the overnight rate later this year. While Canada benefited last year from lower global interest rates without the Bank of Canada having to lift a finger, an apparent bottoming in global growth (at a low level) and détente on the trade front may reverse the fall in yields over the next several months. A softening economic outlook alongside tighter financial conditions is a recipe for pushing the Canadian economy further below potential and weakening inflation, conditions the Bank of Canada will not ignore, as it made obvious today.”
The next monetary policy meeting is scheduled for 4 March.
FocusEconomics Consensus Forecast analysts see the target for the overnight rate ending 2020 at 1.60%. For 2021, analysts project the target for the overnight rate to end the year at 1.68%.
Canada - Interest Rate Data
|Policy Interest Rate (%)||1.00||1.00||0.50||0.50||1.00|
5 years of economic forecasts for more than 30 economic indicators.
Canada Interest Rate Chart
Source: Bank of Canada.
|Bond Yield||1.70||1.00 %||Dec 31|
|Exchange Rate||1.30||0.15 %||Jan 01|
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January 22, 2020
On 22 January, the Bank of Canada (BoC) left its target for the overnight rate unchanged at 1.75%, as had been widely expected by market analysts. The Bank’s decision to stand pat was driven by inflation successively landing close to target, with inflation clocking in at 2.2% for the second consecutive month in December.
January 22, 2020
Consumer prices increased 0.4% on a seasonally-adjusted basis from a month earlier in December, stronger than November’s 0.1% uptick.
January 20, 2020
House prices increased 0.2% on a month-on-month non-seasonally-adjusted basis in December, according to the Teranet-National Bank Composite House Price Index, matching November’s rise.
January 9, 2020
Housing starts decreased to 197,329 units on a seasonally-adjusted annualized rate (SAAR) basis in December, according to the Canada Mortgage and Housing Corporation (CMHC), down from November’s revised 204,320-unit reading (previously reported: 201,318), and well below analysts’ expectations of 210,200 units.
January 2, 2020
In December, the IHS Markit Manufacturing Purchasing Managers’ Index (PMI) inched down to 50.4 from 51.4 in November.