Bank of Canada Overnight Rate Update
On March 7th, the Bank of Canada maintained its target for the overnight rate at 1.25%. The Bank rate is correspondingly 1.5% and the deposit is 1%.
In Canada, national accounts data show that the economy grew by 3% in 2017, bringing the level of real GDP in line with the projection in the Bank's January Monetary Policy Report. However, in the 4th quarter, GDP was slower than expected, largely due to higher imports, while exports only made a partial recovery from their 3rd decline. The gain in imports mainly reflected stronger business investment, which adds to the economy's capacity.
Strong housing data in 2017, and softer data at the beginning of this year indicate some pulling forward of demand ahead of new mortgage guidelines and other policy measures. It will take some time to FULLY assess the impact of these, as well as recently announced provincial measures, on housing demand and prices. The bank continues to monitor the economy's sensitivity to higher interest rates.
With this information in mind, the Governing Council maintained the target for the overnight rate at 1.25%. While the economic outlook is expected to warrant higher interest rates over time, some continued monetary policy accomodation will likely be needed to keep the economy operating close to potential and inflation on target. The Governing Council will remain cautious in counselling future policy adjustments, guided by incoming data in assessing the economy's sensitivity to interest rates, evaluation of economic capacity and the dynamics of both wage growth and inflation.
The next scheduled date for announcing the overnight rate target is April 18, 2018.
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