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Bank of Canada Refrains from May 2018 Interest Rate Hike

The Bank of Canada interest rate is remaining at 1.25% for June of 2018.

On May 30, 2018, the Bank of Canada (BOC) made a scheduled announcement. The overnight rate stayed at 1.25%. The Bank Rate is 1.5% and the deposit rate is 1%.

The interest rate has stayed at 1.25% since January of 2018. It has increased three times since July of 2017, going from a low of 0.5%

Following the April of 2018 announcement, experts speculated that the BOC would either increase interest rates again during the May announcement, or at the next scheduled statement on July 11, 2018. However, as the May 30 date approached, many economists began to predict the BOC would hold the rate for now, and it appears they were correct.

According to the CBC, regulatory changes “shaking up Canadian housing markets” and uncertain trading conditions prompted the BOC to stay at 1.25% for now.

The CBC reported BMO economist Benjamin Reitzes saying that since new mortgage rules kicked in on Jan. 1 of this year, housing sales have slipped more than 20%.

“With sales yet to stabilize, it’s hard to imagine the [bank] will opt to tighten policy further and increase the downside risk to housing,” Reitzes said.

“With much uncertainty remaining and a third consecutive quarter of soft growth, we anticipate the [Bank of Canada] will hold policy rates steady at the May 30 meeting.”

The BOC cited the Canadian housing market as one of its reasons for maintaining the overnight rate in its May 30 press release.

“Housing resale activity has remained soft into the second quarter, as the housing market continues to adjust to new mortgage guidelines and higher borrowing rates,” stated the BOC.

“Going forward, solid labour income growth supports the expectation that housing activity will pick up and consumption will continue to contribute importantly to growth in 2018.”

Other factors that played into the BOC’s May 2018 decision included the ongoing uncertainty about trade policies, higher-than-assumed global oil prices, and recent fluctuations in Canadian gasoline prices that are affecting inflation.

On the positive side, the BOC’s growth outlook for the first half of 2018 was on target, at around 2%. Exports of goods have been higher than forecasted and machinery and equipment imports continue to be strong.

Overall, the BOC continued to take a proceed-with-caution approach, stating that “higher interest rates will be warranted to keep inflation near target.”

“Governing Council will take a gradual approach to policy adjustments, guided by incoming data. In particular, the Bank will continue to assess the economy’s sensitivity to interest rate movements and the evolution of economic capacity,” stated the BOC.

As of May 29, 2018, the day before the rate announcement, the odds of a July 11 increase were sitting at about 55%.

The next BOC announcement is scheduled for July 11, 2018. Purview will have the update on the result and what it means for the Canadian mortgage market.

Purview can help you adapt your mortgage business regardless of the BOC interest rates. Our tools allow to find new lead opportunities, detect fraud, and validate property information quickly and accurately. Call us today to learn more: 1.855.787.8439.

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