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Bank of Canada Rate Announcement Holds at 1.25% for March 2018
The Bank of Canada rate announcement on March 7, 2018 was much less dramatic than the January statement: the current interest rate held at 1.25%.
For the first time in several months, the BOC referenced housing data as a factor influencing the Bank of Canada (BOC) rate announcement decision.
The BOC noted “strong housing data in late 2017” and “softer data” at the beginning of this year. A press release from the BOC indicated the higher numbers in late 2017 could have been from a surge of demand before new mortgage rules were introduced on January 1, 2018.
“It will take some time to fully assess the impact of these [the new mortgage guidelines and policy measures], as well as recently announced provincial measures, on housing demand and prices,” the BOC stated.
The mentioned “recently announced provincial measures” could be referencing new tax policies introduced in B.C. — an increase to the foreign-buyers’ tax and new property tax largely targeting out-of-province owners, including those who live in other parts of Canada.
One of the BOC’s stated goals with increasing interest rates was lowering the record-high level of Canadian household debt. During the March 7 announcement, the BOC said that household credit growth has decelerated for three consecutive months.
Other factors that played into the BOC’s decision to hold the interest rate at 1.25% included inflation and wage growth.
The BOC interest rate has increased three times since July of 2017, going from 0.5% to 0.75% in July, to 1% in September of 2017, and 1.25% in January of 2018.
The next BOC rate announcement is scheduled for April 18, 2018. The BOC Governing Council has said they will take a cautious approach and factor in several new developments, such as the recent federal budget.
The full text of the March 7 BOC rate announcement can be found at https://www.bankofcanada.ca/2018/03/fad-press-release-2018-03-07/.
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