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Interest rate hikes on hold, for now

Interest rate hikes on hold, for now

Posted on: 4/2/2019 | Author: ATB Financial's Economics + Research Team

The ups and downs of the Canadian economy make it difficult to predict what the Bank of Canada will do with its key policy interest rate (the rate from which other lenders take their lead).

At the end of 2018, for example, it looked like a strong Canadian economy would spur the Bank to continue raising rates in the new year. But, by early March, the Bank was citing the slowing global and Canadian economies as a reason for holding steady. Then new numbers from Statistics Canada showed Canada’s economy had beat expectations, growing by 0.3 per cent in January.

A relatively strong national economy led the Bank of Canada ​ to raise its key policy interest rate from 1.0 per cent to 1.75 per cent over the course of 2018. However, a “more pronounced and widespread” than expected global slowdown, as well as a “sharper and more broadly based” ebbing of Canadian economic growth, has kept the rates unchanged so far in 2019.

The Bank would like to see its policy rate reach what it calls the “neutral range” of 2.5 to 3.0 per cent. It is still unclear whether the better-than-expected rise in January’s GDP will be enough to trigger an increase at the next interest rate announcement on April 24th, or whether dark economic clouds such as the potential for a no-deal Brexit will keep its finger off the trigger.​​

BoC rates, graph

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