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Discussion Starter · #1 ·
Bank of Canada maintains overnight rate target at 1/2 per cent

Bank of Canada > Press > Press Releases > Bank of Canada maintains overnight rate target at 1/2 per cent

Here are the most recent changes to the Bank of Canada prime rate (aka the overnight rate):
- June to September 2010: three increases of 0.25% each time, the prime rate changed from from 0.25% to 1.0% (0.75% total increase)
- January to July 2015: two decreases of 0.25% each time, the prime rate changed from 1.0% to 0.50% (0.50% total decrease)

The current rate has remained the same for the past 1 year and 2 months.

The next scheduled date that the Bank of Canada will announce their overnight rate target is Wednesday October 19, 2016.

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Discussion Starter · #2 ·
Here is what our Chief Economist, Dr. Sherry Cooper had to say (direct link):


Bank of Canada Cautious About the OutlookBank of Canada Hold Overnight Rate at 0.5%

The Bank of Canada's decision to hold rates steady once again was very much as expected, even though first half growth was well below the forecast in the July Monetary Policy Report. US growth in the first half of this year was also disappointing, reflecting weakness in business and residential investment. US consumer spending was strong, held up by a buoyant labour market.

Rebounding US growth in the second half bodes well for a sustained rebound in Canadian exports. The recently released July trade report for Canada showed a major improvement in exports to the US, a long-awaited sign of a revival in Canadian growth.

Other recent indicators suggest that Canada's economy entered the third quarter on a stronger footing following the wildfire-related slump in the second quarter. Q2 growth was also depressed by the larger-than-expected contraction in exports. The Bank expects a strong rebound in Q3 growth as oil production resumes and rebuilding in Alberta begins.

Fiscal stimulus will also play a role in the second half economic revival as consumer spending is boosted by the July 1 introduction of Canada Child Benefits payments. Federal infrastructure spending should also begin to impact growth by the final quarter of this year. Nevertheless, the Bank suggested that growth for the remainder of this year will remain below their July forecast.

Inflation is in line with BoC expectations. Total CPI inflation is below the 2% target largely owing to the decline in consumer energy prices. "Measures of core inflation remain around 2%, reflecting offsetting effects of excess capacity and past exchange rate depreciation".

As always, the final paragraph of the Bank's statement assesses economic risks. The report suggests that the inflation profile has trended downward since July. As for elevated household debt levels, long a concern, the Bank alluded to the recent slowdown in the Vancouver housing market suggesting that while still early days, it might well be the start of a soft landing. Recent data for Toronto, however, suggest that housing activity remained as robust as ever in August. Clearly, household imbalances continue to rise and heighten financial vulnerabilities.

Given the likely path of economic growth in Canada, I expect the Bank to maintain the current stance of monetary policy through 2017. This means that Canadian interest rates will remain well below rates in the US, as the Fed will likely hike the overnight rate once again either later this year or early next year. Mortgage rates will remain low for longer.

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it says
"" Bank of Canada maintains overnight rate target at 1/2 per cent
OTTAWA - The Bank of Canada today announced that it is maintaining its target for the
overnight rate at 1/2 per cent. The Bank Rate is correspondingly 3/4 per cent and the deposit rate
is 1/4 per cent.
Global growth in the first half of 2016 was slower than the Bank had projected in its July
Monetary Policy Report (MPR), although the Bank continues to expect it to strengthen gradually
in the second half of this year. The US economy was weaker than expected in the second quarter,
notably reflecting a contraction in business and residential investment. While a healthy labour
market and solid consumption should remain supportive of growth in the rest of the year, the
outlook for business investment has become less certain. Meanwhile, global financial conditions
have become even more accommodative since July.
While Canada's economy shrank in the second quarter, the Bank still projects a substantial
rebound in the second half of this year. Second-quarter GDP was pulled down by the Alberta
wildfires in May and by a drop in exports that was larger and more broad-based than expected.
Exports disappointed even after accounting for weaker business and residential investment in the
United States, adjustments in the resource sector, and cutbacks in auto production. The economy is
expected to rebound in the third quarter as oil production recovers, rebuilding commences in
Alberta, and consumer spending gets an additional lift from Canada Child Benefit payments. As
federal infrastructure spending starts to have more impact, growth in the fourth quarter is projected
to remain above potential. While the strength in exports during July was encouraging, the ground
lost over previous months raises the possibility that the profile for economic activity will be
somewhat lower than anticipated in July.
Inflation is roughly in line with the Bank's expectations. Total CPI inflation is below the 2 per
cent target, mainly because of the temporary effects of lower consumer energy prices. Measures of
core inflation remain around 2 per cent, reflecting offsetting effects of excess capacity and past
exchange rate depreciation.
On balance, risks to the profile for inflation have tilted somewhat to the downside since July. At
the same time, while there are preliminary signs of a possible moderation in the Vancouver
housing market, financial vulnerabilities associated with household imbalances remain elevated
and continue to rise. The Bank's Governing Council judges that the overall balance of risks
remains within the zone for which the current stance of monetary policy is appropriate, and the
target for the overnight rate remains at 1/2 per cent.
Information note:
The next scheduled date for announcing the overnight rate target is 19 October 2016. The next full
update of the Bank's outlook for the economy and inflation, including risks to the projection, will
be published in the MPR at that time. ""

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As Inflation rate is generally in accordance with the Bank's expectation . Total CPI expansion is beneath the 2 for each penny target, primarily as a result of the transitory impacts of lower energy prices. Hope the energy prices will again decrease in next financial yearThread 4
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