Bank of Canada Calls a Second Interest Rate Announcement
If you're about to renew or take out a mortgage, you might want to take note of the Bank of Canada's second interest rate hike.
The interest rates have increased twice in less than two months in an effort to adjust to Canada's recent economic growth. The April-to-June performance led to a surprisingly healthy growth in the first three months of 2017 and easily exceeded the Bank of Canada's projections, deeming it to be "self-sustaining." Increased consumer spending was also a sign that Canadians are enjoying employment and income growth which prompted the Bank to increase their rates. On top of that, widespread strength in business investment and exporting seemed to have an effect on it as well. The financial institution raised its target for the overnight rate to one per cent (up from .75 per cent). The BOC says The Bank Rate is correspondingly 1, 1/4 per cent and the deposit rate is 3/4 per cent.
The Bank continues to expect a moderation in the pace of economic growth in the second half of 2017, for the reasons described in the July Monetary Policy Report (MPR), but the level of GDP is now higher than the Bank had expected," the report reads. Given the stronger-than-expected economic performance, Governing Council judges that today's removal of some of the considerable monetary policy stimulus in place is warranted. Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation.
Looking in the future, there's a range of factors to consider when making a decision regarding the interest rates in the coming months. The Bank of Canada might have to take a simmered approach when the economy cools down from it's current pace. The main focus will be the evolution of the economy's potential and labour market conditions. The bank will also look at household indebtedness, a key consideration when it comes to elevating interest rates (as Canadians are quite in debt, especially regarding housing).
The next scheduled date for announcing the overnight rate target is October 25, 2017.