Mark Carney and the Bank of Canada (BOC) announced today that they are keeping the overnight rate at 1%. This will in turn leave the prime lending rate at 3%. Existing variable rate mortgagors will be pleased to know that their ultra-low mortgage interest rate will remain unchanged, at least until the next Bank of Canada meeting date scheduled for July 17, 2012
In the announcement the BOC acknowledged that the outlook for global economic growth has weakened in recent weeks. More specifically they draw attention to the European crisis, the fact that economic activity in emerging markets is slowing faster and more broadly than expected and that economic activity in Canada was slightly slower than expected. These are all factors that maintain downward pressure on the Bank of Canada’s target for the overnight interest rate.
Although the BOC is maintaining the target for the overnight interest rate at 1% they still hint that it may become necessary to begin raising interest rates in the medium term if and when the inflation rate picks up. Their wording points out that our current low interest rates are the result of considerable monetary policy stimulus so an increase in the overnight rate shouldn’t be seen as a brake to the economy, but rather a return to normal.
To read the details of the Bank of Canada’s announcement, you can find the press release here: