Bank of Canada’s overnight lending rate

mortgage rates

The Bank of Canada’s overnight lending rate will end the year exactly where it started—unchanged at 1.75%.
As was widely expected, the Bank of Canada decided once again to leave rates on hold as it continues to assess the need for monetary policy easing given a strong domestic economy against a background of global headwinds.
The BoC’s Governing Council noted that the Canadian economy continues to perform well, with growth in the third quarter of 1.3%, moderately expanding consumer spending, along with rising wages and investment spending. Additionally, inflation remains right around the Bank’s target of 2%, “consistent with an economy operating near capacity,” the council added.
“Future interest rate decisions will be guided by the Bank’s continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy—notably consumer spending and housing activity.”
2020 Outlook
Market expectations are for at least one quarter-point rate cut by mid-2020. Overnight Index Swap markets are currently pricing in a roughly 70% chance of a rate cut by July, according to Westpac.
Some, however, are calling for monetary policy easing earlier in the year.
“Our assumption has been that the BoC’s patience will eventually run out, with persistent trade uncertainty and below-trend growth around the turn of the year prompting a rate cut in early-2020,” economists at RBC Economics wrote in a research note. “Rising odds of a U.S.-China trade deal has pared back market expectations for a rate cut. – Canadian Mortgage Trends

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