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The Bank Of Canada Keeps Interest Rate At 1.25%

Rachel Surman

Mar 06, 2018

The Bank of Canada (BoC) announced Wednesday it’s keeping its trendsetting interest rate at 1.25%. This interest rate is called the “Overnight Rate” and is what dictates the prime consumer lending rates of Canada’s “Big Six Banks.” For context, the Bank hiked the rate back-to-back in July and , kept it the same in  and , and then again raised the rate to 1.25% in January of 2018.

Why did the interest rate stay the same?

“Global growth remains solid and broad-based. In the United States, new government spending and previously-announced tax cuts are anticipated to boost growth in 2018 and 2019,” the Bank said in a . “However, trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.”

According to the BoC, Canada’s economy grew by 3% in 2017. Although, GDP growth was slower than expected due to higher imports. Exports made only a partial recovery from their third-quarter deadline. The imports reflected stronger business investment, also adding to our economy’s capacity.

Wondering how the news affect you? We’ve got you covered!

Lending rates will stay the same, for now

When the BoC raises its interest rate, prime lending rates follow – which currently sit at 3.45%. Interest rates on  depend on the individual. However, borrowing from banks may become more expensive as the rates increase like they did in January. Consumer debt is also at an all-time-high – Canadians carry, on average, . This is why many consider a  personal loan attractive: your interest rate won’t change, even when the key interest rate does.

What’s next?

The Bank said while wage growth has firmed, it still remains lower than would be typical in an economy with no labour market slack. Inflation is also fluctuating because of factors such as gasoline, electricity, and minimum wages.

Moving forward, the Bank will remain cautious in considering future policy adjustments, using incoming economic data to assess Canada’s sensitivity to interest rates, the evolution of economic capacity, and the dynamics of both wage growth and inflation.

The BoC’s next scheduled announcement is set for April 18th, 2018.

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