Great News: Bank of Canada maintains overnight rate target at 1 per cent!!

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1%. The Bank Rate is correspondingly 1 1/% and the deposit rate is 3/4 %.

The global economic recovery is proceeding broadly in line with the Bank’s projection in its January Monetary Policy Report (MPR), although risks remain elevated. U.S. activity is solidifying and remains supported by stimulative fiscal and monetary policies. Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. Robust demand from emerging-market economies is driving the underlying strength in commodity prices, which could be further reinforced temporarily by supply shocks arising from recent geopolitical events.

The recovery in Canada is proceeding slightly faster than expected, and there is more evidence of the anticipated rebalancing of demand. While consumption growth remains strong, there are signs that household spending is moving more in line with the growth in household incomes. Business investment continues to expand rapidly as companies take advantage of stimulative financial conditions and respond to competitive imperatives. There is early evidence of a recovery in net exports, supported by stronger U.S. activity and global demand for commodities. However, the export sector continues to face considerable challenges from the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance.

While global inflationary pressures are rising, inflation in Canada has been consistent with the Bank's expectations. Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the economy.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered.

Stay Posted: The next scheduled date for announcing the overnight rate target is 12 April,2011



Warm Regards,
Zeenia Kola
Sales Representative with Re/Max Realty Specialists Inc., Brokerage
Email: zeenia@zeeniakola.com
Ph: 905-828-3434
Add: 2691 Credit Valley Rd, #101, Mississauga, L5M 7A1
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Third Time is a Charm: Bank of Canada Hikes Up Interest Rates Again

The Bank of Canada has announced today that it is raising its overnight rate by 25 basis points. That changes the overnight rate from 0.75% to 1%. This change in the overnight rate has a direct effect on the prime lending rate, which will now jump from 2.75% to 3.00%.

In recent weeks, many reports have come out projecting smaller than projected growth, although many top economists still believed that the Bank of Canada would increase the key rate. As outlined in the press release "the global economic recovery is proceeding but remains uneven, balancing strong activity in emerging market economies with weak growth in some advanced economies".

Future forecasts for growth in Canada expect growth to be solid and business investment is expected to rise. From the press release, the Bank of Canada believes that the economic recovery will be more gradual than the previous Monetary Policy Report, which was released in July 2010, mainly in part due to the weakness in the United States.

Even amidst the report of slowing economic growth, the Bank of Canada determined that allowing a 25 basis point increase would still allow for stimulation, even though there may be some financial tightening. The increase in the prime rate is one key way that the Bank of Canada tries to control the inflation rate within the country, in order for it to stay around 2%.

This rate increase of 25 basis points is the third consecutive rate increase since June 1st, 2010. Canada was the first from the Group of Seven to begin increasing interest rates, and previous publications by the Bank of Canada predicted Canada to be leading the way in terms of the global economic recovery.

However, the Bank of Canada heeded in saying "any further reduction in monetary policy stimulus would need to be carefully considered in light of the unusual uncertainty surrounding the outlook". Most economists have now tightened their forecasts for future rate increases.

Since the rate hike announcement at the policy meeting, the Canadian dollar has increased 1.09 cents, sitting at 0.9650 cents US by midday Wednesday. The Toronto Stock Exchange also felt some gains of about 0.2%.

The next scheduled date for the Bank of Canada to announce the overnight rate is scheduled for October 19, and an updated Monetary Policy Report will be released on October 20, 2010.

Current home owners with a variable mortgage are most likely wondering what this all means in terms of their existing loan. Variable rate mortgages are based on Prime lending rate minus or plus a specific amount.Contact your Accredited Mortgage Professional, Mortgage Broker today to find out more about your available mortgage solutions.