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The Bank of Canada is maintaining the Canadian interest rate for the eleventh month in a row.
On September 4, 2019, the Bank of Canada (BOC) announced that the overnight interest rate will stay at 1.75% for another month. The last time the rate increased was in October of 2018 when it went from 1.5% to the current 1.75%.
One factor that played into the September decision was the Canadian real estate market.
According to the BOC, “housing activity has regained strength more quickly than expected as resales and housing starts catch up to underlying demand, supported by lower mortgage rates.”
However, this isn’t necessarily a positive as they went on to say that increased housing activity and lower mortgage rates could add to “already-high household debt levels.” They noted that “mortgage underwriting rules should help to contain the buildup of vulnerabilities.”
Beyond the real estate market, the Canadian economy showed strength in the second quarter of 2019. The BOC reported that energy production, export growth, and wages all went up.
While wages increased, consumption spending dropped, as did business investment. So, although Canadians may be making more money, they are not necessarily spending more.
The BOC expects economic activity to slow in the second half of the year.
Many economists expected the Sept. 4 hold. Some had even predicted the BOC would cut interest rates instead due to global trade uncertainty. U.S.-China trade conflict was the main reason cited for holding the interest rate. The BOC will continue to monitor it as they approach the next interest rate announcement.
Read the full text of the September 4 announcement: https://www.bankofcanada.ca/2019/09/fad-press-release-2019-09-04/
The next announcement is scheduled for October 30, 2019.
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