Despite acknowledging the negative effect that the falling oil prices will have on the economy, policy makers at the Bank of Canada are still holding out for a “broadening recovery” and their benchmark interest rate remains unchanged at 1%. To find out more, check out the full article below.
Ottawa, Ontario 3 December 2014 – During an announcement made this morning, Stephen Poloz, Governor at the Bank of Canada, confirmed the predictions of many economists and kept the overnight lending rate at 1%. The decision means that the rate will have not changed since September 2010, the longest pause since the aftermath of the Second World War.
The rate is intended to find a balance between inflation and economic growth. Too low and inflation will get out of control – too high and economic growth could be stunted.
The bank noted the rise of inflation, which rose from an annual rate of 2.4% in October, but pinned this change on temporary factors such as higher telecommunication prices and the weakening Canadian dollar.
However, the Bank of Canada added that they see the economy showing signs of a “broadening recovery” and that it is benefiting from the growing US economy. In the end, it seems the combination of contrasting factors, such as inflation and dropping oil prices, as well as others such as high household debt, have led the bank to consider there to be no need to alter the current rate of 1%.
This is highlighted in their press release that went public earlier today:
“While inflation is at a higher starting point relative to the October MPR, weaker oil prices pose an important downside risk to the inflation profile. This is tempered by a stronger U.S. economy, Canadian dollar depreciation, and recent federal fiscal measures. Household imbalances, meanwhile, present a significant risk to financial stability. Overall, the balance of risks remains within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent.”
For more information, take a look at the links below:
Bank of Canada Press Release
Bank of Canada More Hawkish On Economy Though Oil Price Plunge and Household Debt Risks
Want to know how this latest Bank of Canada press release affects your mortgage rate? Contact Tim Lacroix in Calgary today on (403) 648-1541.