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Canadian Interest Rate Holds for January 2020; Economic Growth Forecast Falls

The Canadian interest rate is staying the same for another month, however, the economic growth forecast is not.

On January 22, 2020, the Bank of Canada (BOC) announced that the overnight interest rate will remain at 1.75%, the same rate it has been since October of 2018. Correspondingly, the Bank Rate is 2% and the deposit rate is 1.5%.

However, while the interest rate is staying the same, the BOC has changed its economic outlook.

The BOC dropped its forecast for 2019 Q4 from 1.3% to 0.3% and predicted weaker growth in the near-term for 2020.

Specifically, the BOC pointed to:

  • A high degree of uncertainty and geopolitical tensions.
  • Weakened business investments and exports.
  • Slowed down job creation.
  • Softer consumer spending.

Some of the slowdown in 2019 was related to special factors, the BOC said, such as strikes, poor weather, and inventory adjustments. However, other contributions may point to a larger issue.

“The weaker data could also signal that global economic conditions have been affecting Canada’s economy to a greater extent than was predicted,” the BOC stated.

However, there was a bright spot in the forecast. The BOC said that residential investment has been “robust” through most of 2019 and remained at a “still-solid” pace in the final quarter of the year. And while consumer spending has been softer than expected, that could have benefits, too.

“Moreover, during the past year Canadians have been saving a larger share of their incomes, which could signal increased consumer caution,” the BOC said. “This could dampen consumer spending but help to alleviate financial vulnerabilities at the same time.”

In 2020, the BOC is projecting household spending to pick up from population and income growth, and the recent federal income tax cut. They predict the global economy will grow by just over 3% in 2020 and 3.25% in 2021.

The next Canadian interest rate announcement is scheduled for March 4, 2020. Read the full text of the January 22 BOC release here: https://www.bankofcanada.ca/2020/01/fad-press-release-2020-01-22/

What does this mean for mortgage professionals? If consumers are saving more money, it could indicate higher levels of debt. This may indicate the need for mortgage products that assist with debt consolidation or increasing savings.

For recent data about second charges registered on title, see the latest Teranet Market Insight Report: https://www.purview.ca/teranet-market-insight-report-december-2019/

Purview’s solutions for mortgage and financial professionals can also help you stay on top of opportunities and changes within your portfolio. Monitor PINs, mitigate risk, and find more opportunities with our in-depth tools.

Learn more today. Call 1-855-787-8439 or visit www.purview.ca.

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