There has officially been no change to the Canadian interest rate in 2019.
On December 4, 2019, the Bank of Canada announced that it would again hold the overnight interest rate at 1.75%. The Bank Rate is 2% and the deposit rate is 1.5%. The 1.75% overnight rate was set in October of 2018.
The December 4 release marks the final Bank of Canada (BOC) interest rate announcement of 2019 — and with it closes out the year with no change.
2019 saw much speculation about what would happen to the Canadian interest rate. At the beginning of the year, some thought it would continue to increase despite less consumer spending and a weakened housing market.
However, as the year continued global economic uncertainty changed that outlook. Factors such as trade tension between the U.S. and China had many economists speculating that Canadian interest rates would stay the same — or even decrease, as the U.S. Federal Reserve has done.
Yet as we close out 2019, the BOC has held steady on the 1.75% rate. They outlined their reasons for doing so in the December 4 announcement.
“There is nascent evidence that the global economy is stabilizing,” the BOC stated, “with growth still expected to edge higher over the next couple of years.”
On the global front, the BOC also pointed to waning recession concerns and a relatively stable Canadian dollar and commodity prices. They acknowledged the ongoing trade conflicts and related uncertainty as “the biggest source of risk to the outlook.”
Within Canada, the outlook looked brighter. Although growth in 2019 Q3 slowed consumer spending expanded as did stronger wage growth. The Canadian housing market was another “source of strength” due to housing investment, population growth, and low mortgage rates.
Investment spending, particularly in transportation equipment and engineering projects, showed strong growth.
Inflation remains at target, the BOC said.
“Based on developments since October, Governing Council judges it appropriate to maintain the current level of the overnight rate target,” the BOC stated.
“Future interest rate decisions will be guided by the Bank’s continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy — notably consumer spending and housing activity.”
The next BOC interest rate announcement is scheduled for January 22, 2020.
Read the full text of the December 4 BOC announcement here: https://www.bankofcanada.ca/2019/12/fad-press-release-2019-12-04/
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