Bank of Canada Announces Interest Rate
Thursday Oct 20th, 2016
The Central Bank announced its overnight rate target Wednesday.
The Bank of Canada is maintaining its target for the overnight rate at 0.5%.
Economic growth is now projected to be lower than previously forecast in July’s Monetary Policy Report.
“This is due in large part to slower near-term housing resale activity and a lower trajectory for exports. The federal government’s new measures to promote stability in Canada’s housing market are likely to restrain residential investment while dampening household vulnerabilities,” the Bank said.
Export data is improving, according to the Bank, but growth will be slower over the next two years than previously forecasted, due in part to lower global demand.
“After incorporating these weaker elements, Canada’s economy is still expected to grow at a rate above potential starting in the second half of 2016, supported by accommodative monetary and financial conditions and federal fiscal measures,” the BoC said. “As the economy continues to adjust to the oil price shock, investment in the energy sector appears to be bottoming out.”
Household spending is on the rise, as well as employment and incomes outside energy-reliant regions.
The Bank forecasts real GDP growth of 1.1% this year and “about” 2% in 2017 and 2018.
It now projects the economy will return to full capacity by mid-2018, which is much later than the original forecast of July 2016.
“Given the downward revision to the growth profile and the later closing of the output gap, the Bank considers the risks around its updated inflation outlook to be roughly balanced, albeit in a context of heightened uncertainty,” the BoC said. “Meanwhile, the new housing measures should mitigate risks to the financial system over time.
“At present, the Bank’s Governing Council judges that the overall balance of risks is still in 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.”