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Bank of Canada Interest Rate Stays at 1% After December 6 Announcement

The Bank of Canada announced its latest interest rate target on December 6, 2017. The Bank of Canada interest rate stayed at 1%, which was set in September of 2017.

“The global economy is evolving largely as expected in the Bank’s October Monetary Policy Report (MPR),” the Bank stated in a December 6 press release.

“In the United States, growth in the third quarter was stronger than forecast but is still expected to moderate in the months ahead. Growth has firmed in other advanced economies. Meanwhile, oil prices have moved higher and financial conditions have eased. The global outlook remains subject to considerable uncertainty, notably about geopolitical developments and trade policies.”

Recent Canadian data is also in line with the October report, said the Bank. Growth has been moderate while remaining “above potential” in the second half of 2017. The release also noted employment growth has been strong and wages have gone up. According to Business Insider, Statistics Canada reported on Friday that Canada’s unemployment rate has fallen to the lowest levels since November 2008 and the country’s economy has added 441,000 new full-time jobs.

Business investment also grew and public infrastructure funding is becoming more evident. Exports declined by more than was expected, but the Bank predicts it will return.

Housing continued to moderate, according to the Bank.

While those factors remained in place, inflation was higher than anticipated and “will continue to be boosted in the short term by temporary factors, particularly gasoline prices.”

The next Bank of Canada interest rate announcement is scheduled for January 17, 2018. Although the Bank continues to hold at 1% for now, the press release noted it likely won’t stay at 1% forever.

“While higher interest rates will likely be required over time, Governing Council will continue to be cautious, 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,” said the press release.

Most experts expected the Bank of Canada’s decision to hold the interest rate at 1%. The interest rate increases first came in July of 2017, going from 0.5% to 0.75% — the first hike in seven years. It rose again in September, moving from 0.75% to 1%. In October, the Bank of Canada announced that the rate would stay at 1% for now.

Moving forward, expert opinions are still forming on what the future will look like for Canadian interest rates, but it seems likely there will be another interest rate increase — and possibly more than one — in 2018.

The interest rate hold means that Canadians shopping for mortgages, or those who have a variable-rate mortgage, have a small reprieve. However, the new Canadian mortgage rules are still coming into effect January 1, 2018, and experts aren’t yet certain how they will affect the Canadian real estate market.

As Canadian debt levels rise to higher than ever before, the Bank of Canada interest rate decision could affect a great deal of debts owing — from credit card bills, to student loans, to, of course, mortgages.

Purview can help lenders and mortgage brokers assess the current Canadian real estate market using up-to-date, comprehensive tools and technology.

Learn more about Purview’s services at www.purviewforlenders.com or www.purviewforbrokers.ca, or by calling 1.855.787.8439.

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