Bank of Canada Interest Rate Announcement: May 27, 2015
This morning, the Bank of Canada (BoC) announced it would leave the overnight lending rate at 0.75% for another seven weeks, confirming analyst expectations.
Changes in the overnight rate influence other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar.
The BoC slashed the overnight rate by 0.25% in January from the 1.00% it had been at for nearly 4.5 years down to 0.75%, which BoC Governor Stephen Poloz described as “insurance” against the downside risks to Canada’s economy from the sharp fall in oil prices.
Poloz may be keeping interest rates steady, but this doesn’t mean everything is going according to plan. Some disappointing numbers came out last Friday showing an annual price rise (inflation) at just 0.8% in April, against a 2% policy target, owing mostly to lower energy prices compared with a year earlier.
An analysis by the Financial Post says Poloz may wait for US to make the first move in raising its key interest rate. However, in a speech in Charlottetown last week, Poloz seemed dumbfounded by the US economy, saying “the U.S. economy is slightly puzzling right now,” and finishing with “that’s why I’m not offering you a new forecast today.”
What does this mean for you? Nothing new. Since there’s no change, it’s business as usual. But in his speech in Charlottetown, Mr. Poloz did highlight how lower interest rates and cheaper gasoline are helping Canadians. He said a household renewing a $100,000 mortgage is saving $250 a year on interest payments after the bank’s January rate cut and lower gasoline prices are saving households $500 a year.
The next Bank of Canada interest rate announcement is scheduled for July 15, 2015. It will be accompanied by the BoC’s quarterly Monetary Policy Report outlining a more detailed forecast for the Canadian economy and future direction of interest rates.
Source: Bank of Canada Press Release – May 27, 2015
Also read:
Overnight Lending Rate in Canada