Today, Wednesday, April 18, 2018, The Bank of Canada (BoC) maintained its target for the overnight rate at 1.25%. The Bank Rate is correspondingly 1.50% and the deposit rate is 1%.

This means that the Prime rate on one’s mortgage, line of credit or student loan will remain at 3.45%. BoC has shared some insight on the current economic conditions in relation to their announcement.

On the one hand, the economy is near full-capacity, unemployment is at its lowest level since the 1970s, and inflation has climbed back to the BoC’s 2% target.

But a host of other factors are still weighing on the economy, including uncertainty over the North American free-trade agreement, loss of market share by exporters in the vital U.S. market, and the record debt levels of Canadians, BoC Governor Stephen Poloz said.

“In Canada, GDP growth in the first quarter was weaker than the Bank had expected, but should rebound in the second quarter, resulting in 2% average growth in the first half of 2018. The economy is projected to operate slightly above its potential over the next three years, with real GDP growth of about 2% in both 2018 and 2019, and 1.8% in 2020. This stronger profile for GDP incorporates new provincial and federal fiscal measures announced since January. It also reflects upward revisions to estimates of potential output growth, which suggest the Canadian economy has made some progress in building capacity.

Slower economic growth in the first quarter primarily reflects weakness in two areas. Housing markets responded to new mortgage guidelines and other policy measures by pulling forward transactions to late 2017. Exports also faltered, partly owing to transportation bottlenecks. Some of the weakness in housing and exports is expected to be unwound as 2018 progresses.

The Bank anticipates that Canadian exports will strengthen as foreign demand increases, but not enough to recover the ground lost during recent quarters. Export growth is being increasingly limited by capacity constraints in some sectors. Continued gains in business investment should build additional capacity in those sectors and in the economy more generally. However, both exports and investment are being held back by ongoing competitiveness challenges and uncertainty about trade policies.”

Click here for today’s full announcement from BoC. The next announcement will be on Wednesday, May 30, 2018.
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Bank of Canada, “Bank of Canada maintains overnight rate target at 1 1/4 per cent”, accessed April 18, 2018, https://www.bankofcanada.ca/2018/04/fad-press-release-2018-04-18/