Another Bank of Canada Rate Announcement Right Around the Corner – Will it Mean Feast or Famine?

February 26th, 2018

The next Bank of Canada rate announcement is coming up quickly, on March 7, 2018, and many Canadians are wondering whether it means interest rates increasing again.

For the past nine months, much speculation has circled around the Bank of Canada interest rate, ever since it began increasing in July of 2017 from 0.5% to 0.75%. Since then, it has increased twice more — once in September of 2017, going up to 1%, and again on January 18, 2018, going up to 1.25%.

During the January Bank of Canada rate announcement, officials said interest rates would likely be increasing even more in 2018. So, will we see another hike on March 7?

Since the January announcement, economic experts have been debating that very question — and so far the consensus is that while we likely won’t see interest rates increasing in March, it won’t be long before they do rise again.

Canada’s Parliamentary Budget Officer predicts the next interest rate increase will come in April.

“We continue to expect that the Bank of Canada will again raise its policy interest rate by 25 basis points in April,” the PBO said in the latest Economic and Fiscal Monitor report.

The PBO isn’t the only one making the prediction that interest rates will increase again — at least once this year — but other experts aren’t quite agreeing on when it will happen. While the Bank did say that further interest rate increases are likely in the forecast, the Governing Council also said that it would approach any further hikes with caution.

According to the CBC, markets currently aren’t predicting an interest rate increase in March, with only a 27.7 per cent probability of a boost. The CBC says interest rates are more likely to increase again closer to the end of 2018.

Bank of Canada governor Stephen Poloz has said that he doesn’t know when interest rates will increase again, as the answer is influenced by so many factors.

“…we’ve explained to people that there are a number of important issues that force us to not be mechanical or to use a rule or to plan ahead in that way,” Poloz told CNCB.

“We’ve said we are totally data dependent.”

In the same interview, Poloz also made mention of Canada’s high level of consumer debt and said that he felt the economy would be “more sensitive to higher interest rates than in the past.”

When the Bank of Canada increases interest rates again is also dependent on NAFTA, the North American Free Trade Agreement. U.S. President Donald Trump has threatened to withdraw from NAFTA, which would significantly alter the trade deal and Canada’s economy.

As of right now, it seems unlikely that we’ll see interest rates increasing in March, but so much can change so quickly it’s, of course, impossible to say for sure.

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