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The Bank of Canada overnight interest rate is staying at 1.75% after the May 29 announcement.

The Bank Rate is correspondingly 2% and the deposit rate is 1.5%.

The May 29 hold was widely expected by economists, however, what might not have been as expected is the optimism the Bank of Canada (BOC) relayed in its message.

“Recent Canadian economic data are in line with the projections in the Bank’s April Monetary Policy Report (MPR), with accumulating evidence that the slowdown in late 2018 and early 2019 is being followed by a pickup starting in the second quarter,” the BOC stated.

The BOC pointed to several factors in the economic “pickup,” including the housing market.

“Meanwhile, housing market indicators point to a more stable national market, albeit with continued weakness in some regions,” the BOC said.

Other factors that contributed to the BOC’s May announcement include:

  • The oil sector, which the BOC said is beginning to recover “as production increases and prices remain above recent lows.”
  • Continued strong job growth.
  • Recent data supporting a pickup in consumer spending and exports in the second quarter.
  • Overall growth in business spending appears to have firmed.

On the downside, the BOC noted that “inventories rose sharply in the first quarter, which may dampen production growth in coming months.”

Additionally, trade conflicts and restrictions are still leading to uncertainty.

The 1.75% interest rate has been in place since October of 2018, and it does not appear to be changing soon. While some have speculated the BOC might be considering an interest rate cut, there was no mention of that in the May 29 report.

“Overall, recent data have reinforced Governing Council’s view that the slowdown in late 2018 and early 2019 was temporary, although global trade risks have increased,” the BOC stated.

“In this context, the degree of accommodation being provided by the current policy interest rate remains appropriate.

“In taking future policy decisions, Governing Council will remain data dependent and especially attentive to developments in household spending, oil markets and the global trade environment.”

The next BOC interest rate announcement is scheduled for July 10, 2019.

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